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IMTilRSTATc  COIVll\A£RCc 
COMMISSION 

UNIFORM  SYSTtM  OF 
ACCOUNTS  FOR  TELE- 
PHONE COMPANIES 


5#- 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


^^2  f^-o-C-*— 


UNIFORM  SYSTEM  OF  ACCOUNTS 


FOR 


TELEPHONE  COMPANIES 


AS  PRESCRIBED  BY  THE 


INTERSTATE  COMMERCE  COMMISSION 

IN  ACCORDANCE  WITH  SECTION  20  OF  THK 
ACT  TO  REGULATE  COMMERCE 


FIRST  ISSUE 

Effective  on  January  1,  1913 


L. 


■^p.ri  < 


WASHINGTON 
1915 


.  .  •     •   •    • 


•  • !.♦ 


The  Interstate  Commerce  Commission. 


Charles  A.  Prouty,  0/  Vermont. 
JuDSON  C.  Clements,  0/  Georgia. 
Franklin  K.  Lane,  0/  California. 
Edgar  E.  Clark,  of  Iowa. 
James  S.  Harlan,  of  Illinois. 
Charles  C.  McChord,  of  Kentucky. 
Balthasar  H.  Meyer,  of  Wisconsin. 

John  H.  Marble,  Secretary. 


\.'>'..,>.sV      n(» 
ADDITIONAL  COPIES 

OF  THIS  PUBLICATION  MAY  BE  PROCURED  FROM 

THE  SUPERINTENDEXT  OF  DOCUMENTS 

GOVERN-MENT  PRINTING  OFFICE 

"WASHINGTON,  D.  C. 

AT 

10  CENTS  PER  COPY 


(2) 


HE 

TZVS 


^  CONTENTS. 


SJ 


^ 


Page. 

Order  of  the  Commieeion 5 

Introductx)ry  letter 7 

General  instructions 9 

Telephone  companies  divided  into  two  classes 9 

^  Accounts  should  show  fixed  capital,  operating  revenues,  and 

vj\  operating  exjienses  pertaining  solely  to  any  exchange  or 

"^                  toll  system  or  common  to  two  or  more  systems 9 

Yj  ."^    Balance-sheet  statement 11 

Instnictions  pertaining  to  balance  sheet 13 

Balajice-sheet  accounts 13 

Cost  or  book  value  of  securities  owned 13 

.               Reacquired  securities 13 

<                 Discount  and  premium  on  capital  stock 13 

^               Discount,  expense,  and  premium  on  funded  debt 14 

Contingent  assets  and  liabilities 15 

Text  explanatory  of  balance-sheet  accounts 16 

Fixed  capitiil  accounts 31 

Instructions  pertaining  to  fixed  capital  accounts 32 

Fixed  capital  defined 32 

Costs  to  be  actual  money  costs 33 

^              Interest  accruing  during  construction  period 33 

*              Cost  of  labor,  materials,  and  supplies 33 

Plant  and  equipment  and  other  property  purchased 33 

■:S             Fixed  capital  withdrawn  or  retired 34 

Texts  explanatory  of  fixed  capital  accounts 36 

Income  statement 45 

Instructions  pertaining  to  the  income  statement 47 

Income  account  defined 47 

Taxes 47 

Text  exnlanator\-  of  accounts  in  income  statement 48 

Corporate  surplus  or  deficit  account 56 

Instructions  pertaining  to  corporate  surplus  or  deficit  account. .  56 

Corporate  surplus  or  deficit  account  defined.'. 56 

Text  explanatory  of  corporate  surplus  or  deficit  account 57 

Operating  revenue  accounts 60 

Instructions  pertaining  to  operating  revenue  accounts 60 

.  Operating  revenues  defined 60 

Deductions  from  revenues 60 

Commissions 60 

(3) 


Page. 

Text  explanatory  of  operating  revenue  accounts 61 

Operating  expense  accounts 64 

Instructions  pertaining  to  operating  expense  accounts 66 

Repairs  defined 66 

Cost  of  repairs 67 

Depreciation  of  plant  and  equipment 67 

Extraordinary  casualties  and  unantici{)ated  reconstruction.  68 

Joint  operating  expenses 68 

Text  explanatory  of  operating  expense  accounts 69 

Clearing  accounts 77 


At  a  General  Session  of  the  INTERSTATE  COMMERCE 
COMMISSION,  held  at  its  office  in  Washington,  D.  C, 
on  the  10th  day  of  December,  1912. 

The  subject  of  a  I^niform  System  of  Accounts  to  be 
prescribed  for  and  kept  by  telephone  companies  being 
under  consideration,  the  follo\vLng  order  was  entered: 

It  is  ordered,  That  the  Uniform  System  of  Accounts  for 
Telephone  Companies  with  the  text  pertaining  thereto, 
embodied  in  printed  form  to  be  hereafter  known  as  First 
Issue,  a  copy  of  which  is  now  before  this  Commission,  be, 
and  the  same  is  hereby,  appro v^ed;  that  a  copy  thereof 
duly  authenticated  by  the  Secretary  of  the  Commission 
be  filed  in  its  archives,  and  a  second  copy  thereof,  in  like 
manner  authenticated,  in  the  office  of  the  Division  of 
Carriers'  Accounts;  and  that  each  of  said  copies  so  au- 
thenticated and  filed  shall  be  deemed  an  original  record 
thereof. 

It  is  further  ordered,  That  the  said  I'niform  System  of 
Accounts  for  Telephone  Companies  with  the  text  per- 
taining thereto,  be,  and  the  same  is  hereby,  prescribed 
for  the  use  of  telephone  companies  having  annual 
operating  revenues  exceeding  S50,000,  subject  to  the  pro- 
visions of  the  act  to  regulate  commerce  as  amended,  in 
the  keeping  and  recording  of  their  accounts;  that  each 
and  er\"ery  such  carrier  and  each  and  every  receiver  or 
operating  trustee  of  any  such  carrier  be  required  to  keep 
all  accounts  in  conformity  therewith;  and  that  a  copy  of 
the  said  First  Issue  be  sent  to  each  and  every  such  carrier 
and  to  each  and  every  receiver  or  operating  trustee  of  any 
such  carrier. 

It  is  further  ordered,  That  any  such  carrier  or  any 
receiver  or  operating  trustee  of  any  such  carrier  may  sub- 
divide any  primary  account  in  the  said  Fii-st  Issue  estab- 
lished (as  permitted  in  the  general  instructions  contained 

^5) 


in  the  said  First  Issue) ;  or  may  make  assignment  of  the 
amount  charged  to  any  such  primary  account  to  operat- 
ing divisions,  to  its  individual  lines,  or  to  States:  Pro- 
vided, however,  That  such  subprimary  accounts  set  up 
or  such  assignments  made  by  any  such  carrier  or  by  any 
receiver  or  operating  trustee  of  any  such  earner  do  not 
impair  the  integrity  of  the  accounts  hereby  prescribed. 

It  is  further  ordered,  That  in  order  that  the  basis  of 
comparison  with  previous  years  be  not  destroyed,  any 
such  carrier  or  any  receiver  or  operating  trustee  of  any 
such  carrier  may,  during  the  twelve  months  from  the 
time  that  the  said  First  Issue  becomes  effective,  keep  and 
maintain,  in  addition  to  the  accounts  hereby  prescribed, 
such  portion  or  portions  of  its  present  accounts  as  may  be 
deemed  desu'able  by  any  such  carrier,  or  by  any  receiver 
or  operating  trustee  thereof,  for  the  purpose  of  such  com- 
parison; or,  during  the  same  period,  may  maintain  such 
groupings  of  the  primary  accounts  hereby  prescribed  as 
may  be  desired  for  that  pui-pose. 

It  is  further  ordered.  That  any  such  carrier  or  any 
receiver  or  operating  trustee  ot  any  such  carrier,  in 
addition  to  the  accounts  hereby  prescribed,  may  unless 
otherwise  ordered,  keep  any  temporary  or  experimental 
accounts  the  purpose  of  which  is  to  develop  the  efficiency 
of  operation :  Provided,  however.  That  sucb  temporary  or 
experimental  accounts  shall  not  impair  the  integrity  of 
any  primary  account  hereby  prescribed. 

It  is  further  ordered,  That  January  1,  1913,  be,  and  is 
hereby,  fixed  as  the  date  on  which  the  said  I'lrst  issue 
of  the  Uniform  System  ot  Accounts  for  Telephone  Com- 
panies shall  become  effective. 

By  the  Commission: 

John  H.  Marble, 

Secretary. 


IXTRODUC'TORY  LETTER. 


Interstate  Commerce  Commission, 

Division  of  Carriers'  Accounts, 

Washington,  Decemher  10,  1912. 
To  Telephone  Companies: 

This  Uniform  System  of  Accounts  for  Tcl(»phonc  Com- 
panies is  issued  in  accordance  with  an  order  of  the  Inter- 
state Commerce  Commission,  the  text  of  whicli  immedi- 
ately precedes  this  letter.  The  act  to  regulate  commerce, 
as  amended,  invests  the  Commission  with  authority  to 
prescribe  the  forms  of  accounts  to  be  kept  by  telephone 
companies  subject  to  the  act,  and  prohibits  the  use  of 
any  accounts  other  than  those  prescribed  by  the  Commis- 
sion. The  obsen-ance  of  the  rules  and  regulations  stated 
in  this  system  of  accounts  therefore  becomes  obligatory 
upon  persons  having  direct  charge  of  the  accounts  of  the 
companies  concerned,  and  such  persons  will  be  held  re- 
sponsible for  their  proper  application. 

In  formulating  this  system  of  accounts  it  has  been  the 
endeavor  of  the  Division  of  Carriers'  Accomits  to  enlist 
the  cooperation  of  the  various  telephone  companies 
throughout  the  United  States.  For  that  purpose  Ac- 
counting Series  Circular  Xo.  30,  containing  a  tentative 
system  of  accounts,  was  submitted  to  all  telephone  com- 
panies of  which  there  was  record  for  criticisms  and  sug- 
gestions, and  due  consideration  was  given  to  all  criticisms 
and  suggestions  received. 

Attention  is  directed  to  the  fact  that  this  system  of 
accounts  applies  only  to  companies  having  annual  operat- 
ing revenues  exceeding  850,000;  that  such  c(Hnpanies  are 
divided  into  two  classes,  according  to  their  earning  ca- 
pacity (see  par.  1,  p.  9),  and  that  it  has  been  sought 

(7) 


to  provide  classifications  of  accounts  for  each  class^ 
adjusted  to  their  respective  needs.  No  system  of  ac- 
counts has  yet  been  prescribed  for  companies  having 
annual  operating  revenues  of  $50,000  or  less. 

Accounting  officers  are  invited  to  correspond  with  this 
office  should  question  arise  with  regard  to  the  correct 
interpretation  of  any  account  or  rule  herein  prescribed, 
in  order  th^t  uniformity  may  be  secured  in  the  applica- 
tion of  the  provisions  of  the  classifications. 

Charles  A.  Lutz, 
Chief  Examiner  of  Accounts. 


GENERAL   INSTRUCTIONS. 

1.  Telephone  companies  divided  into  two  classes. — For  the  pur- 
pose of  this  system  of  accounts,  the  telephone  companies  affected  by 
the  preceding  order  are  divided  into  two  classes,  as  follows: 

Class  A. — Comi)anies  having  average  annual  operating  revenues  ' 
exceeding  $250,000. 

Class  B. — Companies  having  average  annual  operating  revenues  * 
exceeding  $50,000,  but  not  more  than  $2.50,000. 

Two  schemes  of  accounts,  designed  to  meet  the  respective  needs 
of  companies  of  classes  A  and  B,  indicated  above,  are  pro\'ided.  The 
clas.sifications  for  the  two  classes  of  companies  are  published  jointly, 
with  the  titles  of  the  accounts  printed  in  CAPITALS  and  small 
CAPITALS,  and  in  italics. 

Class  A  companies  shall  keep  all  the  accounts  (so  far  as  they  may  be 
applicable  to  their  affairs)  the  titles  of  which  are  printed  in  CAPITALS 
and  SMALL  CAPITALS  and  also  the  accounts  the  titles  of  which  are 
printed  in  italics,  except  that  where  an  account  shown  in  CAPITALS 
and  SMALL  CAPITALS  is  subdi\'ided  into  accounts  the  titles  of  which  are 
printed  in  italics,  it  is  not  required  that  the  former  be  kept*  Class  A 
companies  may  further  subdivide  any  of  the  accounts  prescribed 
herein,  provided  that  such  subdivisions  do  not  impair  the  integrity  of 
any  of  the  accounts  prescribed. 

Class  B  companies  shall  keep  all  the  account.s  (so  far  as  they  may 
be  applicable  to  their  affairs)  the  titles  of  which  are  printed  in 
CAPITALS  and  small  capitals.  "Where  such  accounts  are  subdi- 
vided into  accounts  the  titles  of  which  are  printed  in  italics,  it  is  not 
required  that  claims  B  companies  shall  keep  separate  accounts  for  the 
latter,  (."lass  B  companies  may,  if  they  so  desire,  keep  the  more 
extended  accounts  prescribed  for  class  A  companies,  or  may  further 
subdivide  such  accounts,  provided  that  such  subdi\'isions  do  not 
impair  the  intogi-ity  of  any  of  the  acco\ints  pro?<Tibed. 

2.  Accounts  should  sliov/  fixed  capital,  operating  revenues,  and  oper- 
ating expenses  pertaining  solely  to  any  exchange  or  toll  system  or  com- 
mon to  two  or  more  systems. — [a)  Telephone  companies  should  keep 
their  fixed  capital  accounts  in  such  manner  as  will  enable  them  to  show, 

1  In  order  thut  frequent  changes  raaj'  be  avoided,  compunie.';  operating  established 
telephcno  plants  may  adopt  the  scheme  of  accounts  in<licatod  by  the  average  of  their 
annual  revenues  for  three  years  preceding  the  date  cf  this  order.  If  at  the  close  of  any 
fiscal  year  the  averaTe  of  tlie  annual  revenues  for  the  three  preceding  years  is  greater 
than  the  amount  given  for  the  class  in  which  the  company  has  been  put,  the  higher 
sciierr.e  of  accounts  should  be  adopted.  New  companies  should  estimate  the  amount  of 
their  annual  revenues  and  adopt  tl:e  scheme  of  accounts  provided  for  companies  with 
average  annual  revenues  equal  to  th.e  amount  of  the  estimate. 

(9) 

;2o28*— Ij— 2 


10 

when  60  required  by  the  Commission,  (1)  the  cost  of  fixed  capital 
devoted  solely  to  any  exchange  system,  (2)  the  cost  of  fixed  capital 
devoted  solely  to  any  toll  system,  and  (3)  the  cost  of  fixed  capital  used 
in  common  by  two  or  more  exchange  or  toll  systems. 

(b)  The  Classification  of  Operating  Revenues  provides  separate  ac- 
counts for  exchange  revenue  and  for  toll  revenue.  Where  it  is  neces- 
sary to  apportion  the  revenue  between  these  accounts  telephone  com- 
panies should  be  prepared,  when  so  required  by  the  Commission,  to 
furnish  the  basis  used  in  making  such  apportionment. 

(c)  Telephone  companies  should  keep  their  operating  expense  ac- 
counts in  such  manner  as  will  permit  them  to  show,  when  so  required 
by  the  Commission,  (1)  the  operating  expenses  pertaining  solely  to 
any  exchange  system,  (2)  the  operating  expenses  pertaining  solely 
to  any  toll  system,  and  (3)  the  operating  expenses  which  are  common 
to  two  or  more  exchange  or  toll  systems. 


11 

BALANCE-SHEET  STATEMENT. 

ASSET  ACCOUNTS. 

Permanent  and  Long  Term  Investments —  page. 

100.  Fixed  Capital  Installed  Prior  to  January  1,  1913...  16 

101.  Fixed  Capital  Installed  Since' December  31,  1912 16 

102.  Reserve  for  Accrued  Depreciation — Cr 16 

103.  Reserve  FOR  Amortization  OF  Intangible  Capital — Cr.  17 

104.  Construction  Work  in  Progress 17 

105.  Investment  Securities 17 

106.  Stocks  of  System  Corporations 18 

107.  Funded  Debt  of  System  Corporations 18 

108.  Miscellaneous  Stocks 18 

109.  Miscellaneous  Funded  Debt 18 

110.  Advances  to  System  Cori'Orations  for  Construction, 

Equipment,  and  Betterments 18 

111.  Miscellaneous  Investments 18 

Working  Assets — 

112.  Cash  and  Deposits 18 

113.  Cash 19 

114 .  Special  Deposits 19 

115.  Employees'  Working  F"unds 19 

116.  Marketable  Securities 19 

117.  Bills  Receivable 19 

118.  Due  from  Subscribers  and  Agents 20 

119.  Accounts  Receivable  from  System  Corporations....  20 

120.  Miscellaneous  Accounts  Receivable 20 

121.  Matured  Interest  and  Dividends  Receivable 20 

122.  Materlals  and  Supplies 20 

123.  Other  Current  Assets 21 

Accrued  Income  not  Due — 

124.  Unmatured  Interest,  Dividends,  and  Rents  Receiv- 

able   21 

Deferred  Debit  Items — 

125.  Sinking  Fund  Assets '.  21 

■126.  Insurance  and  Other  Reserve  Fund  Assets 22 

127.  Provident  Fund  Assets 22 

128.  Prepayments t 22 

129.  Prepaid  Rents 22 

130.  Prepaid  Taxes 22 

131 .  Prepaid  Insurance 23 

132.  Prepaid  Directory  Expense 23 

133.  Other  Prepayments 23 

134.  Unextinguished  Discount  on  Capital  Stock 23 

135.  Unamortized  Debt  Discount  and  Expense 23 

136.  Other  Suspense -      23 

Corporate  Deficit — 

137.  Corporate  Deficit 23 


12 

UABILITY  AOOOimTS. 

Stock —  Page. 

150.  Capital  Stock 24 

151.  Stock  Liability  for  Conversion  of  Securities 24 

152.  Premiums  on  Capital  Stock 25 

Long  Term  Debt — 

153.  Funded  Debt 25 

154.  Receivers'  Certificates 26 

155.  Advances  from  System  Corporations  for  Construc- 

tion, Equipment,  and  Betterments 26 

Working  Liabilities — 

156.  Judgments  Unpaid - 26 

157.  Bills  Payable 27 

158.  Audited  Vouchers  and  Wages  L^npaid 27 

159.  Subscribers'  Deposits 27 

160.  Accounts  Payable  to  System  Corporations 27 

161 .  Miscellaneous  Accounts  Payable 27 

162.  Matured  Interest,  Dividends,  and  Rents  L^npaid 27 

163.  Matured  Funded  Debt  Unpaid 27 

164.  Service  Billed  in  Advance 27 

165.  Other  Current  Liabilities 28 

Accrued  Liabllities  not  Due — 

166.  Taxes  Accrued 28 

167.  Other  Accrued  Liabilities  not  Due 28 

Deferred  Credit  Items — 

168.  LTnextinguished  Premium  on  Debt 28 

169.  Insurance  and  Casualty  Reserves 28 

170.  Liability  on  Account  of  Provident  Funds 29 

Appropriated  Surplus — 

171.  Surplus  Invested  Since  December  31,  1912,  in  Fixed 

Capital 29 

172.  Surplus  Invested  in  Sinking  Funds 29 

173.  Other  Surplus  Reserved 30 

Corporate  Surplus — 

174.  Corporate  Surplus  Unappropriated 30 


13 

INSTRUCTIONS  PfeRTAINlNG  TO  BALANCE  SHEET. 

o.  Balance-sheet  accounts. —  By  balance-pheot  arrounts  are  meant 
those  titles  under  which  the  ledger  accounts  are  combined  and  sum- 
marized to  show  the  assets,  liabilities,  and  profit  or  loss  of  the  bu-siness 
at  a  given  time.  WTiere  the  title  and  definition  of  a  balance-sheet 
account  clearly  indicate  that  it  is  a  summary  of  other  accounts,  it  is 
not  required  that  a  special  ledger  account  shall  be  raised  under  such  a 
title  to  include  the  balance  from  the  accounts  usually  carried  on  the 
ledger. 

4.  Cost  or  book  value  of  securities  owned. — The  term  cost  or  book 
value,  as  applied  to  various  accounts  representing  securities  owned,  is 
intended  to  recognize  the  option  of  the  company  of  carrying  its  invest- 
ments in  securities  either  at  cost  or  at  a  reasonable  valuation  other  than 
cost.  WTienever  securities  are  acquired  they  are  to  be  entered  on  the 
books  at  cost.  If,  subsequently,  the  company  desires  to  adjust  their 
value  on  account  of  substantial  appreciation  or  depreciation,  the 
entries  in  its  books,  with  respect  to  such  securities,  as  well  as  its  annual 
reports  to  the  Commission,  should  clearly  show  the  reasons  for 
making  the  adjustments. 

5.  Eeacquired  securities. — The  capital  stock  and  funded  debt  lia- 
bility accounts  in  the  balance  sheet  are  intended  to  include  only  the 
par  value  of  such  capital  stock  or  funded  debt  securities  as  have  been 
actually  issued  to  bona-fide  holders  for  value  or  such  securities  as  have 
been  issued  by  other  companies  and  have  been  assumed  by  the  account- 
ing company  and  are  actually  outstanding  at  the  date  of  the  balance- 
sheet  statement. 

TMien  capital  stock  or  funded-debt  securities  have  been  actually 
issued  to  bona-fide  holders  for  value  (or  after  such  issue  by  another 
company  have  been  assumed  by  the  accounting  company")  and  after 
such  issue  (or  assumption)  have  been  reacquired  by  the  company 
under  circumstances  which  require  that  they  shall  not  be  treated  as 
paid  or  retired,  they  may  be  charged  at  par  value  to  the  appropriate 
asset  account,  but  on  the  balance-sheet  statement  they  should  be  shown 
separately  as  a  deduction  from  both  the  asset  and  liability  accounts  in 
order  that  the  asset  accounts  for  securities  owned  will  include  only- 
securities  of  other  companies  and  that  the  liability  accounts  for  securi- 
ties issued  or  assumed  will  include  only  those  in  the  hands  of  the  public. 

If  any  such  securities  are  reacquired  for  more  or  less  than  their  par 
value,  the  difference  between  the  par  value  and  the  cost  of  reacquire- 
ment,  after  adjusting  any  amounts  carried  in  the  discount-and-premium 
accounts  or  other  accounts  with  respect  to  such  securities,  should  be 
debited  or  credited  to  Corporate  Surplus  or  Deficit  account,  unless 
reacquired  for  a  sinking  or  other  fund,  which  is  required  to  be  repre- 
sented by  a  reserve,  in  which  case  the  difference  should  be  debited  or 
credited  to  the  appropriate  reserve  account. 

6.  Discount  and  Premium  on  Capital  Stock. — Ledger  accounts 
sliould  be  provided  to  cover  the  discounts  and  premiums  on  each  class 


14 

of  capital  stock  issued  or  assumed  by  the  company.  By  discount  is 
meant  the  excess  of  the  par  value  of  stocks  issued  or  assumed  over  the 
actual  money  value  of  the  consideration  received  for  such  stock  (except 
stock  that  has  been  sold  and  reacquired);  by  premium  is  meant  the 
excess  of  the  actual  money  value  of  the  consideration  received  for 
stock  issued  or  assumed  over  the  par  value  of  such  stock  (except  stock 
that  has  been  sold  and  reacquired).  Entries  in  these  accounts  repre- 
senting discounts  sliould  be  carried  therein  until  offset,  (1)  by  premiums 
realized  on  subsequent  sales  of  the  same  class  of  stock,  (2)  by  assess- 
ments levied  on  the  stockholders,  (3)  by  appropriations  of  surplus  for 
that  purpose,  or  (4)  by  charges  to  Corporate  Surplus  or  Deficit  account 
upon  reacquiremeut  or  retirement  of  the  stock.  Entries  in  these 
accounts  representing  premiums  realized  should  be  carried  perma- 
nently, unless  offset  (1)  by  discounts  suffered  on  sales  of  the  same  class 
of  stock  or  (2)  by  credits  to  Corporate  Surplus  or  Deficit  account  upon 
reacquirement  or  retirement  of  the  stock. 

If  the  net  of  the  balances  in  the  discount-and-premium  accounts  for 
all  classes  of  capital  stock  sold  or  exchanged  is  a  debit  balance,  the 
amount  should  be  included  in  the  balance-sheet  statement  in  account 
No.  134,  "Unextinguished  Discount  on  Capital  Stock";  if  a  credit 
balance,  the  amount  should  be  shown  in  account  No.  152,  '  'Premiums 
on  Capital  Stock." 

In  no  case  should  discount  on  capital  stock  be  charged  to  or  included 
in  any  account  as  a  part  of  the  cost  of  acquiring  any  property,  tangible 
or  intangible,  or  as  a  part  of  the  cost  of  operation. 

7.  Discount,  Expense,  and  Premium  on  Funded  Debt. — Ledger 
accounts  should  be  provided  to  cover  the  discount,  expense,  and 
premiums  on  each  class  of  funded  debt  issued  or  assumed  by  the  com- 
pany. By  discount  is  meant  the  excess  of  the  par  value  of  funded-debt 
securities  issued  or  assumed,  and  the  accrued  interest  thereon,  over 
the  actual  cash  value  of  the  consideration  received  for  such  securities 
(except  securities  that  have  been  sold  and  reacquired);  by  premium 
is  meant  the  excess  of  the  actual  cash  value  of  the  consideration  received 
for  funded-debt  securities  issued  or  assumed  over  the  par  value  of  such 
securities  and  the  accrued  interest  thereon  (except  securities  that  have 
been  sold  and  reacquired). 

By  expense  is  meant  all  expenses  in  connection  with  the  issue  and 
sale  of  evidences  of  debt,  such  as  fees  for  drafting  mortgages  and  trust 
deeds,  fees  and  taxes  for  recording  mortgages  and  trust  deeds,  cost  of 
engi'aving  and  printing  bonds,  certificates  of  indebtedness,  and  other 
commercial  paper  having  a  life  of  more  than  one  year;  fees  paid  trus- 
tees provided  for  in  mortgages  and  trust  deeds;  fees  and  commissions 
paid  underwriters  and  brokers  for  marketing  such  evidences  of  debt 
and  other  like  expense. 

If  the  net  balance  in  any  of  these  accounts  is  a  debit,  there  should 
be  charged  to  income  account  No.  338,  "Amortization  of  Debt  Dis- 
count and   Expense,"   during  each   fiscal   period   (and   credited   to 


15 

the  discount  and  premium  accounts  in  which  the  discount  and  ex- 
pon.se  i.s  carried)  .such  proportion  of  the  discount  and  expense  on 
the  outstanding  funded  debt  obligations  as  may  be  applicable  to  that 
period.  This  proportion  should  be  determined  according  to  a  rule, 
the  uniform  application  of  which  throughout  the  inten'al  between 
the  date  of  .sale  and  the  date;  of  maturity,  will  extinguish  the  dis- 
coimt  and  expense  on  the  funded  debt.  The  charge  to  income  for  any 
period  shall  not  exceed  the  proportion  applicable  to  that  period,  and 
a  charge  should  be  made  for  each  period  so  long  as  any  portion  of  the 
discount  and  expense  remains  unextinguished.  In  order  that  the 
discount  and  expense  may  be  extinguished  sooner,  the  company  may, 
at  its  option,  charge  to  Corporate  Surplus  or  Deficit  account  all  or  any 
portion  of  the  discount  and  expense  on  funded  debt  remaining  at  any 
time  unextinguished. 

If  the  net  balance  in  any  of  these  accounts  is  a  credit  there  should  be 
credited  to  income  account  No.  339,  "Release  of  Premiums  on  Debt— 
Cr.,"  during  each  fiscal  period  (and  debited  to  the  discount  and  pre- 
mium accounts  in  which  the  premium  is  carried)  surh  proportion  of  the 
premium  on  outstanding  funded  debt  obligations  as  may  be  applicable 
to  that  period.  This  proportion  should  be  determined  according  to 
a  rule,  the  imiform  application  of  which  throughout  the  inter\-al 
between  the  date  of  sale  and  the  date  of  maturity  of  the  debt,  will 
extinguish  the  premium  at  which  such  debt  was  sold. 

If  the  net  of  the  balances  in  the  discount  and  premium  accounts  for 
all  classes  of  funded  debt  sold  or  exchanged  is  a  debit  balance,  the 
amomit  should  be  included  in  account  No.  135,  "Unamortized  Debt 
Discount  and  Expense;"  if  a  credit  balance,  the  amount  should  be 
included  in  account  No.  168,  "Unextinguished  Premium  on  Debt." 

Except  as  provided  in  section  11,  page  33,  no  discoimt  and  expense 
on  fxmded  debt  should  be  charged  to  or  included  in  any  account  as  a 
part  of  the  cost  of  acquiring  any  property,  tangible  or  intangible,  or  as 
a  part  of  the  cost  of  operation . 

8.  Contingent  assets  and  liabilities. — Contingent  assets  and  liabili- 
ties should  not  be  included  in  the  body  of  the  balance-sheet  statement, 
but  should  be  shown  in  detail  in  a  supplementary  statement  accom- 
panying the  balance-sheet  statement.  Contingent  assets  represent 
possible  sources  of  value  contingent  upon  the  fulfillment  of  conditions 
regarded  as  uncertain.  Contingent  liabilities  include  items  which  mav, 
under  certain  conditions,  become  obligations  of  the  company,  but  are 
neither  direct  nor  assumed  obligations  on  the  date  of  the  balance  sheet. 


TEXT  EXPLANATORY  OF  BALANCE-SHEET  ACCOUNTS. 


ASSET  ACCOUNTS. 


PERMANENT  AND  LONG  TERM  INVESTMENTS. 

100.  Fixed  Capital  Installed  Prioe  to  January  1,  1913.' 

In  this  account  (on  the  balance-sheet  statement)  should  be 
shown  the  total  of  the  balances  in  the  ledger  accounts  repre- 
senting the  company's  fixed  capital,  which  was  installed  prior 
to  January  1,  1913,  and  which  is  still  in  ser^dce  at  the  date  of 
the  balance  sheet.     (See  text  of  this  account  on  p.  36.) 

101.  Fixed  Capital  Installed  Since  December  31,  1912.^ 

In  this  account  (on  the  balance-sheet  statement)  should  be 
shown  the  total  of  the  balances  in  the  ledger  accounts  represent- 
ing the  company's  fixed  capital  which  has  been  installed  since 
December  31,  1912,  and  which  is  still  in  service  at  the  date  of 
the  balance  sheet.     (See  text  of  this  account  on  p.  36.) 

102.  Reserve  for  Accrued  Depreciation — Cr.^ 

Credit  to  this  account  such  amounts  as  are  concurrently 
charged  to  account  No.  608,  "Depreciation  of  Plant  and  Equip- 
ment," No.  701,  "Shop  Expense,"  No.  702,  "Stable  and  Garage 
Expense,"  and  No.  703,  "Tool  Expense,"  to  cover  the  expense 
of  depreciation  of  plant,  equipment,  furniture,  tools  and  imple- 
ments, as  specified  in  the  text  of  these  accounts.  This  account 
should  also  be  credited  with  any  amount  carried  in  reserve  on 
January  1,  1913,  to  cover  the  expense  of  depreciation  on  plant, 
equipment,  furniture,  tools  and  implements  installed  prior  to 
that  date. 

Charge  to  this  account  the  realized  depreciation  of  tangible 
fixed  capital  installed  since  December  31,  1912,  when  such  cap- 
ital is  relinquished,  retired,  or  destroyed,  also  the  amount  of 
depreciation  carried  herein  in  respect  to  tangible  fixed  capital 
installed  prior  to  January  1,  1913,  when  relinquished,  retired, 
or  destroyed.     (See  sees.  14,  p.  34,  and  23,  p.  67.) 

Charge  also  to  this  account  such  part  of  the  expenditures  for 
extraordinary  repairs  as  is  concurrently  credited  to  accoimt 
No.  611,  "Repairs  Charged  to  Reserves — Cr." 

1  The  total  of  accounts  Nos.  100  and  101  should  be  drawn  down  on  the  balance-sheet 
statement,  and  the  total  of  accounts  No.s.  102  and  103  deducted  therefrom,  the 
difference  being  shown  as  the  net  total. 

(16) 


17 

103.  Reserve  tor  Amortization  of  Intangiule  Capitai. — Cr.' 

Credit  to  this  account  such  amounts  as  are  concurrently 
charged  to  account  No.  340,  "Amortization  of  landed  Capital,"' 
and  to  account  No.  674,  "Amortization  of  Franchises  and  Pat- 
ents." Charge  to  this  account  when  any  franchise,  patent,  or 
landed  capital  expires  or  is  relinquished,  the  amount  at  which 
it  stood  charged  in  the  company's  fixed  capital  accoiuits  or  such 
portion  thereof  as  has  been  previously  credited  to  this  reserve. 
WTieii  any  intangible  capital  acquired  prior  to  the  raising  of  this 
reserve  expires  or  is  relinquished,  that  portion  of  its  cost  which 
has  not  been  covered  by  credits  to  this  account  or  previou.sly 
written  off  should  be  charged  to  account  No.  414,  "Amortization 
Unprovided  for  Elsewhere." 

104.  Construction  Work  in  Progress. 

This  account  should  include  the  amounts  expended  upon 
plant  that  is  in  process  of  construction  under  estimates  or  work 
orders,  but  is  not  ready  for  service  at  the  date  of  the  balance 
sheet.  It  includes  interest  charged  to  construction,  also  such 
proportion  of  plant  supervision  expenses,  engineering  expenses, 
tool  expenses,  sui)ply  expenses,  and  general  expenses  as  may  be 
properly  chargeable  to  the  construction  work  included  under 
this  account. 

When  the  work  is  completed  on  any  job  the  cost  of  which  has 
been  included  in  this  account,  this  account  should  be  credited 
with  the  amount  at  which  it  stands  charged,  and  the  appropriate 
fixed  capital  or  other  accounts  should  be  concurrently  charged, 
but  expenditures  should  not  be  carried  in  this  account  beyond 
the  close  of  the  fiscal  year  next  succeeding  that  in  which  the 
expenditures  were  made. 

105.  Investment  Securities. 

This  account  should  include  the  cost  or  book  value  of  stocks, 
bonds,  and  other  evidences  of  indebtedness  (including  notes 
having  dateaof  maturity  of  more  than  one  year  from  date  of  issue) 
held  by  the  accounting  company,  and  pledged  as  collateral  for 
other  securities  issued  or  assumed,  or  held  as  a  means  of  obtain- 
ing or  exercising  control  over  other  corporations,  for  devotion  to 
future  operations,  or  for  securing  other  business  advantages. 

In  stating  this  account  or  the  subaccounts  provided  hereunder 
on  the  balance-slicet  statement  the  par  value  of  securities  issued 
or  assumed  by  the  accounting  company  and  carried  in  this 
account  should  be  deducted  in  order  that  this  account  will 
show  oidy  the  cost  or  book  value  of  securities  of  other  companies. 
(See  sec.  5,  p.  13.) 

1  The  total  of  accounts  Nos.  100  and  101  should  be  drawn  down  on  the  balanc»-sheet 
statement,  and  the  total  of  accounts  Nos.  102  and  103  deducted  therefrom,  the 
difference  being  shown  as  the  net  total. 

72528°— Ic 3 


18 

The  following  subaccounts  should  be  kept  by  class  A  com- 
panies: 

106.  Stoclcs  of  System  Corporations.^ 

107.  Funded  Debt  of  System  Corporations.^ 

108.  Miscellaneous  Stocks. 

109.  Miscellaneous  Funded  Debt. 

Note  A  .—Short-term  notes  payable  upon  demand  or  having  dates  of  matu- 
rity of  one  year  or  less  from  the  date  of  issue  should  not  be  included  herein 
but  in  account  No.  110,  "Advances  to  System  Corporations  for  Cortstruction, 
Equipment,  and  Betterments,"  or  No.  117,  "BiUs  Receivable,"  as  may  be 
appropriate. 

Note  B. — In  the  annual  reports  of  class  \  and  class  B  telephone  companies- 
to  the  Commission  investments  will  be  required  to  be  classified  so  as  to  show 
those  held  subject  to  a  lien  of  some  character  and  those  held  free  of  all  lien  or 
pledge. 

110.  Advances    to     System     Corporations     for    Construction, 

Equipment,  and  Betterments. 

This  account  should  include  advances  to  controlling,  affili- 
ated, controlled,  and  subsidiary  corporations  to  enable  such  cor- 
porations to  pay  for  construction,  equipment,  or  additions  and 
betterments,  if  such  advances  are  of  a  permanent  nature  (i.  e., 
if  there  is  not  an  understanding  that  the  advances  are  to  be 
repaid  within  one  year)  or  if  it  is  understood  and  intended  that 
reimbursement  shall  be  made  by  the  issue  of  the  securities  of  the 
debtor  corporation. 

Note  A.— Gifts  to  system  corporations  made  without  expectation  of  reim- 
bursement should  be  included  in  account  No.  353,  "Miscellaneous  Appropri- 
ations from  Income,"  or  No.  416,  "Miscellaneous  Appropriations  of  Sur- 
plus" and  not  in  this  account. 

Note  B. — Temporary  advances  on  open  accounts  to  system  corporations 
and  such  advances  for  purposes  other  than  construction,  equipment,  and 
betterments  should  be  included  in  account  No.  119,  "Accounts  Receivable 
from  System  Corporations." 

111.  Miscellaneous  Investments. 

This  account  should  include  investments  of  a  permanent 
nature  in  property  (tangible  or  intangible)  other  than  that  held 
for  the  operation  of  the  company's  plant  as  a  telephone  system. 
It  should  include  such  items  as  investments  in  lighting,  water, 
and  power  plants,  manufacturing  plants,  lands,  and  buildings 
and  other  property  not  a  part  of  the  company's  plant  for  tele- 
phone operations  or  of  facilities  incident  thereto. 
WORKING  ASSETS. 

112.  Cash  and  Deposits. 

This  account  includes  the  various  items  respecting  cash  and 
special  deposits  as  provided  in  the  following  subaccounts: 


1  By  a  system  corporationis  meant  any  controlling,  affiliated,  controEed,  or  subsidiary 
corporation. 


19 

113.  Cash. 

This  account  should  include  the  amount  of  current  fundo 
available  for  use  on  demand  in  the  hands  of  financial  officers 
and  agents,  or  de])osited  in  hankf^  or  ^vith  trust  companies,  and 
cash  in  transit  for  which  agents  receive  current  credit. 

114.  Special  Deposits. 

This  account  should  include  deposits  to  pay  declared  divi- 
dends and  matured  interest;  cash  realized  from  the  sale  of  securi- 
ties and  deposited  with  trustees  for  disbursement  when  the  pur- 
poses for  which  the  securities  are  sold  are  accomplished ;  amounts 
realized  from  the  sale  of  property  and  deposited  with  trustees  other 
than  in  sinking  funds  until  the  property  is  replaced;  special  de- 
posits (in  other  than  sinking  funds)  for  the  payment  of  debts 
and  interest  not  matured ;  money  and  securities  deposited  to  se- 
cure the  performance  of  contracts;  and  other  deposits  of  a  special 
nature  not  proA-ided  for  elsewhere. 

In  stating  this  account  on  the  balance-sheet  statement  the 
amount  of  any  securities  issued  or  assumied  by  the  accounting 
company  and  included  herein  should  be  deducted  in  order  that 
this  account  will  show  only  the  assets  herein  other  than  the 
company 's  own  securities.     (See  sec.  5,  p.  13.)  . 

115.  Employees'  Working  Funds. 

This  account  should  include  amounts  advanced  to  general  and 
special  agents,  and  other  officers  and  employees  as  working 
funds  from  which  certain  expenditures  are  to  be  made  and 
accounted  for. 

116.  Marketable  Securities. 

Tliis  account  should  include  the  cost  or  book  value  of  securities 
held  in  the  company  "s  treasury  unpledged  and  free  for  sale  and 
not  necessary  or  desirable  for  the  telephone  company  to  hold 
for  the  purpose  of  maintaining  the  integrity  of  its  telephone 
system. 

In  stating  this  account  on  the  balance-sheet  statement  the 
par  value  of  securities  issued  or  assumed  by  the  company  and 
carried  in  tliis  account  should  be  deducted  in  order  that  this 
account  may  show  only  the  cost  or  book  value  of  securities  of 
other  companies.     (See  sec.  5,  p.  13.) 

117.  Bills  Receivable. 

This  account  should  include  the  cost  of  ail  collectible  obliga- 
tions in  the  form  of  bills  receivable  or  other  similar  e\-idences  of 
money  receivable  on  demand  or  witliin  a  time  not  exceeding 
one  year  (excluding  interest  coupons). 

Note  A.-Xotes  having  dates  of  maturity  of  more  than  one  vear  after  date 
of  issue  should  notbeinduded  in  thisai-count  but  inaccount  No.  105,  ■•  Invest- 
ment Securities"  or  No.  116,  "Marketable  Securities." 

Note  B  .—When  loans  to  system  corporal  ions  i  for  construct  ion  puri.oses  are 
evidenced  by  demand  or  short-term  notes  intended  later  to  be  exchanged 
for  other  securities,  the  amount  of  such  loans  should  be  imluded  in  account 
No.  110,  "Advances  to  System  Corporations  for  Construction,  Kiiuipment 
and  Betterments." 


20 

118.  Due  from  Subscribers  and  Agents. 

This  account  should  inchule  amounts  due  from  subscribers  for 
services  rendered  or  billed  and  from  agents  and  collectors  author- 
ized to  make  collections  from  subscribers. 

This  account  should  be  kept  in  such  manner  as  will  enable  the 
companies  to  make  the  following  analysis,  viz: 

(a)  Amounts  due  from  subscribers  who  are  still  receiving  tele- 
phone service. 

(6)  Amounts  due  from  subscribers  whose  telephone  service 
has  been  discontinued  and  whose  accounts  are  in  process  of  col- 
lection in  the  usual  way. 

(c)  Amounts  due  from  subscribers  whose  telephone  ser\'ice 
has  been  discontinued  and  whose  accounts  are  in  litigation  or 
otherwise  suspended. 

Credit  to  a  subaccount  hereunder  such  amounts  as  may  be  con- 
currently charged  to  account  No.  304,  "Uncollectible  Operating 
Revenues,"  to  provide  a  reserve  for  uncollectible  accounts  due 
from  subscribers  and  agents.  If  such  reserve  is  provided,  when 
any  bill  for  services  has  proved  impracticable  of  collection,  this 
subaccount  should  be  charged  and  the  account  in  which  the 
bill  is  carried  should  be  credited. 

119.  Accounts  Receivable  from  System    Corporations. 

•This  account  should  include  amounts  due  from  controlling, 
affiliated,  controlled,  or  subsidiary  corporations  on  open  accounts 
other  than  those  provided  for  in  account  No.  110,  "Advances  to 
System  Corporations  for  Construction,  Equipment,  and  Better- 
ments." 

120.  Miscellaneous  Accounts  Receivable. 

This  account  should  include  all  amounts  owed  to  the  com- 
pany upon  accounts  with  solvent  concerns  (other  than  system  cor- 
porations and  subscribers  and  agents),  also  the  cost  of  all  accounts 
and  claims  (except  notes  or  negotiable  bills)  upon  which  respon- 
sibility is  acknowledged  by  solvent  concerns  or  which  are  suffi- 
ciently secured  to  Vje  considered  good,  and  of  all  judgments 
against  solvent  concerns  where  the  judgment  is  not  appealable 
or  suspended  through  appeal . 

Note. — Cash  on  deposit  in  banks  or  with  trust  companies  should  not  be 
included  in  this  account  but  in  account  No.  113,  "Cash,"  or  No.  114,  "Special 
Deposits." 

121.  Matured  Interest  and  Dh'idends  Receivable. 

This  account  should  include  all  interest  accrued  and  due  but  not 
yet  collected  upon  bonds,  notes,  or  other  commercial  paper  held 
by  or  for  the  benefit  of  the  company,  and  all  dividends  declared 
and  due  by  solvent  concerns  but  not  yet  collected,  the  right  to* 
which  is  in  the  company. 

122.  Materials  and  Supplies. 

This  account  should  include  the  cost  of  unapplied  material, 
including  the  value  of  material  temporarily  in  use  and  not  charged 


21 

out  in  the  company's  accounts;  articles  in  process  of  manufacture 
by  the  company;  tools,  fuel,  stationery,  and  other  supplies. 
Freight  and  express  charges  paid  on  material  included  in  this 
accoimt  slifiuld  be  included  in  the  value  of  such  material. 

Where  discounts  reco\ered  through  prompt  payment  can  not 
be  credited  to  the  particular  bills,  the  cost  at  which  such  mate- 
rials and  supplies  should  V)e  charged  should  be  the  invoice  cost, 
and  any  discounts  recovered  through  prompt  payment  of  bills  for 
such  materials  and  supplies  should  be  credited  to  clearing  ac- 
count No.  704,  "Supply  Expense." 

WTien  any  tangible  fixed  capital  is  discontinued,  ■withdrawn, 
or  retired,  and  when  any  equipment,  materials,  and  supplies 
are  returned  to  store,  the  salvage  value  thereof  .'should  be  charged 
to  this  account,  regardless  of  whether  such  equipment,  materials, 
and  supplies  are  to  be  consumed  in  operation  or  in  construction, 
or  to  be  sold.  If  such  value  is  not  known  and  cannot  readily  be 
determined,  it  should  be  estimated,  and  errors  in  such  estimates, 
when  determined,  involved  during  the  year  in  which  the  esti- 
mates were  made,  should  be  adjusted  through  the  accounts 
involved;  if  later,  then  through  the  Corporate  Surplus  or  Deficit 
account. 

Inventories  of  materials  and  supplies  on  hand  and  unapplied 
should  be  taken  at  least  annuallj',  and  any  shortages  or  overages 
disclosed  by  such  inventories  should  be  credited  or  debited  to 
this  account  and  debited  or  credited  to  clearing  account  No.  704, 
' '  Supply  Expense, ' '  in  case  such  shortages  or  overages  can  not  be 
assigned  to  specific  accounts. 

123.  Other  Currext  Assets. 

This  account  should  include  the  cost  of  all  current  assets  which, 
are  not  includible  under  any  of  the  foregoing  accounts.  By  cur- 
rent assets  are  meant  only  those  things  that  are  readily  con- 
vertible into  money  and  which  are  held  not  as  inA'cstments  but 
with  the  intent  of  being  presently  converted  into  money. 
ACCRUED  INCOME  NOT  DUE. 

124.  Unmatured  Ivtere.st.  Dividends,  and  Rents  Receivable. 

This  account  should  include  the  amount  of  interest  on  loans 
made  and  rents  under  leases  accrued  to  the  date  of  the  balance 
sheet,  but  not  due  or  collectible  until  after  that  date,  and  divi- 
dends declared  on  stocks  owned,  and  dividends  accrued  on  such 
stocks  when  contracts  require  that  the  dividends  be  paid  at 
stated  times. 
DEFERRED  DEBIT  ITEMS. 

125.  Sinking  Fund  Assets. 

This  account  should  include  the  amount  of  cash,  the  cost  or 
book  value  of  live  securities  of  other  companies,  the  par  value  of 
live  securities  issued  or  assumed  by  the  accounting  comjiany, 
and  other  assets  which  are  in  the  hands  of  trustees  of  sinking 


22 

and  other  funds  for  the  purpose  ot  redeeming  outstanding  obli- 
gations; also  amoujits  deposited  with  such  trustees  on  account 
of  mortgaged  property  sold.  A  separate  account  should  be 
raised  for  each  sinking  fund. 

In  stating  this  account  on  the  balance-sheet  statement  the 
par  value  of  any  securities  issued  or  assumed  by  the  company  and 
carried  in  this  accoimt  should  be  deducted  from  the  total  in 
order  to  show  only  the  net  assets  in  sinking  funds  other  than 
the  company's  own  securities.     (See  sec.  5,  p.  13.) 

126.  Insurance  and  Other  Reserve  Fund  Assets. 

This  account  should  include  the  amount  of  cash,  the  cost  or 
book  value  of  securities  of  other  companies,  the  par  value  of  secu- 
rities issued  or  assumed  by  the  accounting  company,  and  other 
assets  in  the  hands  of  trustees  or  managers  of  insurance,  and 
other  funds  that  have  been  raised  and  specifically  set  aside  or 
invested  by  the  company  for  specific  purposes  (except  special 
deposits,  provident  funds,  and  sinking  funds  for  the  retirement 
of  obligations).  A  separate  account  should  be  raised  for  each 
fund. 

In  stating  this  account  on  the  balance-sheet  statement  the 
par  value  of  any  securities  issued  or  assumed  by  the  company 
and  carried  in  this  account  should  be  deducted  from  the  total  in 
order  to  show  only  the  net  assets  in  the  funds  other  than  the 
company's  own  securities.     (See  sec.  5,  p.  13.) 

127.  Provident  Fund  Assets. 

This  account  should  include  the  amoiint  of  cash,  and  the  cost 
or  book  value  of  securities  and  other  assets  in  the  hands  of  trustees 
or  managers  of  employees'  pension  funds,  savings  funds,  relief, 
hospital,  and  other  association  fimds  (whether  contributed  by 
the  company,  by  employees,  or  by  others),  when  such  trustees 
or  managers  are  acting  for  the  company  in  the  administration 
of  such  funds.     (See  account  No.  170. ) 

128.  Prepayment.s. 

This  account  should  include  the  balances  arising  from  the  pay- 
ment of  rents,  taxes,  insurance,  and  like  disbursements,  in 
advance  of  the  period  to  which  they  pertain,  as  defined  in  the 
following  subaccoimts: 

129.  Prepaid  Rents. 

This  account  should  include  the  amount  of  rents  paid  in  ad- 
vance of  the  enjoyment  of  the  term.  As  the  term  is  consumed, 
credit  this  account  at  monthly  intervals  and  debit  the  appropriate 
rent  account  with  the  amount  applicable  to  the  month. 

130.  Prepaid  Taxes. 

This  account  should  include  the  excess  ot  taxes  paid  over 
the  amount  properly  chargeable  to  Income  or  other  accounts  as 
shown  by  the  debit  balance  in  the  Tax  Liability  account.  (See 
sec.  16,  p.  47.) 


23 

131.  Prepaid  Insurance 

^^^l('n  premiums  on  insurance  policies  are  paid  in  advance  of 
their  accrual,  the  amount  prepaid  shall  be  charged  to  this  ac- 
count. As  such  premiums  accrue,  they  ahoul  I  be  credited  at 
monthly  intervals  to  this  account  and  charged  to  account  No. 
668,  "Insurance." 

132.  Prepaid  Directory  Expense. 

Charge  to  this  account  the  cost  of  preparing,  printing,  binding, 
and  delivering  directories;  also  the  cost  of  soliciting  advertise- 
ments for  directories.  When  directories  are  issued,  this  account 
should  be  credited  each  month  and  operating  expense  account 
No.  G49,  "Directory  Expenses,"  should  be  charged  with  the 
proportion  of  the  cost  based  on  the  number  of  months  the  direc- 
tory will  be  in  n.se. 

133.  Other  Prepayments. 

^^^^en  prepayments  are  made  for  anything  other  than  as  pro- 
vided for  in  the  four  next  preceding  accounts,  the  amount  of 
such  prepayments  should  be  included  in  this  account. 

134.  Unextinguished  Discount  on  Capital  Stock. 

If  the  net  of  the  balances  in  the  discount  and  premium 
accounts  for  all  classes  of  capital  stock  sold  or  exchanged  is  a 
debit  balance,  the  amount  should  be  stated  in  this  account. 
(See  sec.  6,  p.  13.) 

135.  Unamortized"  Debt  Discount  and  Expense. 

If  the  net  of  the  balances  in  the  discount  and  premium 
accoimts  for  all  classes  of  funded  debt  sold  or  exchanged  is  a 
debit  balance,  the  amount  should  be  stated  in  this  account. 
(See  sec.  7,  p.  14.) 

136.  Other  Suspense. 

This  account  should  include  all  debits  not  provided  for  else- 
where and  tlie  proper  final  disposition  of  which  is  uncertain. 
It  will  include  all  such  items  as  expense  of  preliminary  surveys, 
plans,  investigations,  etc.,  made  for  determining  the  feasibility  of 
projects  imder  contemplation.  Should  any  such  project  later 
be  carried  to  completion,  such  amounts  should  be  credited  to 
this  account  and  charged  to  the  proper  fixed  capital  accoujit  or 
accounts;  should  it  be  abandoned,  such  amounts  should  be 
charged  to  Corporate  Surplus  or  Deficit  account. 

This  account  should  also  include  the  amounts  carried  in 
suspense  due  to  extraordinary  casualties  and  imanticipated  re- 
constniction.     (See  sec.  24,  p.  68.) 

When  the  proper  disposition  of  any  item   charged  to  this 
accoimt  is  determined,  it  should  be  credited  to  this  account  and 
charged  to  the  appropriate  account  or  accounts. 
CORPORATE  DEFICIT. 

137.  Corporate  Deficit. 

Under  this  head  should  be  shown  the  debit  balance,  if  any, 
in  the  Corporate  Surplus  or  Deficit  account.     (See  sec.  17,  p.  56.) 


24 

LIABILITY  ACCOUNTS. 
STOCK. 

150.  Capital  Stock. 

This  account  should  include  the  par  value  of  stock  actually 
issued.  In  case  of  the  issue  of  two  or  more  classes  of  stock  a 
separate  account  should  be  provided  for  each  class.  Credit  to  a 
subaccount  entitled  "Installments  on  Stock  Subscriptions,"  the 
amount  of  installments  paid  on  subscriptions  for  capital  stocks; 
when  certificates  of  stock  are  issued  for  installments  paid,  this 
subaccount  should  be  cleared  and  the  par  value  of  the  stock  so 
issued  should  be  credited  to  the  account  appropriate  for  such 
stock. 

The  amounts  included  in  this  account,  or  in  the  subaccounts, 
should  be  subdiv-ided  so  as  to  show  (1)  the  par  value  of  certifi- 
cates issued  and  outstanding  and  not  held  by  the  company,  its 
agents  or  trustees,  and  (2)  the  par  value  of  certificates  (pledged 
or  unpledged)  issued  by  the  company  and  held  by  or  for  it. 
In  stating  the  accounts  on  the  balance-sheet  statement,  the  latter 
amount  should  be  deducted  from  the  total  in  order  to  show  only 
the  par  value  of  the  certificates  actually  outstanding  in  the  hands 
of  the  public  at  the  date  of  the  balance-sheet  statement.  (See 
sec.  5,  p.  13.) 

Note  A. — By  capital  stock,  as  the  term  is  here  used,  Is  meant  those  securities 
which  represent  permanent  interests  in  the  corporation,  or  interests  which, 
if  terminable,  are  so  only  at  the  option  of  the  corporation.  Stocks  are  classi- 
fied as — 

Common  stocks,  those  whose  claims  in  the  distribution  of  dividends  are  sub- 
ordinate to  the  claims  of  all  other  stocks. 

Preferred  stocks,  those  having  a  first  claim  upon  those  dividends  which  may 
be  distributed. 

Debenture  stocks,  those  issued  under  a  contract  to  pay  a  specified  return  at 
specified  intervals. 

No  two  stocks  should  be  considered  of  the  same  class  unless  they  are  equal 
in  thair  dividend  or  interest  rights,  their  voting  rights,  and  the  conditions 
under  which  they  may  be  retired. 

Note  B. — If  any  issue  of  stock  is  for  monej',  that  fact  should  be  stated;  and 
if  for  any  consideration  other  than  money,  the  person  to  whom  issued  should 
be  designated,  and  the  consideration  for  which  issued  should  be  described 
with  sufficient  part  icularity  to  identify  it.  If  such  issue  is  to  the  treasurer  or 
other  agent  of  the  company,  to  be  by  him  disposed  of  fpr  the  benefit  of  the 
company,  that  fact  and  the  name  of  such  agent  should  be  shown;  and  such 
agent  should,  in  his  account  of  the  disposition  thereof,  .show  the  like  details 
concerning  the  consideration  realized  thereon. 

Note  C. — If  the  fair  cash  value  of  the  consideration  realized  upon  the  issue 
of  any  amount  of  stock  is  greater  or  less  than  the  par  value  of  such  stock  the 
difference  should  be  credited  or  charged  to  an  appropriate  discount  and 
premium  account,  and  corresponding  reference  thereto  should  be  contained  in 
the  entry  relating  to  such  stock  in  the  stock  account.    (See  sec.  C,  p.  13.) 

lol,  §TocK  Liability  for  Conversion  op  Securities. 

This  account  should  include  the  par  value  of  stock  that  the  com- 
pany has  agreed  to  issue  in  exchange  for  securities  of  constituent 
companies  whose  physical  property  has  been  acquired  under 


25 

Buch  agreement*,  but  whose  securities  have  not  yet  been  surren- 
dered for  exchange. 

152.  Premiums  on  Capital  Stock. 

If  the  net  of  the  balances  in  the  discounts  and  premiums 
accounts  for  all  classes  of  capital  stock  sold  or  exchanged  is  a 
credit  balance,  the  amount  should  be  stated  in  this  account. 
(See  sec.  6,  p.  13.) 
LONG  TERM  DEBT. 

153.  Funded  Debt. 

This  account  should  include  the  par  value  of  fimded  debt 
actually  i.s.sued  or  assumed  by  the  company.  In  case  of  two  or 
more  classes  of  funded  debt  a  separate  account  should  be  provided 
for  each  class.  Credit  to  a  subaccount,  entitled  "Installments 
on  Funded  Debt  Subscriptions,"  the  amount  of  installments  paid 
on  subscriptions  to  funded  debt  issues.  Wlien  bonds,  notes,  or 
other  evidences  of  indebtedness  are  delivered,  this  subaccount 
should  be  cleared  and  the  par  value  of  the  funded  debt  so  issued 
should  be  credited  to  the  account  appropriate  for  such  funded 
debt.  The  entry  in  any  account  should  show  also  the  purpose 
for  which  funde^  debt  is  issued . 

The  amounts  included  in  this  account,  or  in  the  subaccounts, 
should  be  subdivided  so  as  to  show  (1)  the  par  value  of  funded 
debt  seciu"ities  issued  or  assumed  and  outstanding  and  not  held 
by  the  company,  its  agents  or  trustees,  and  (2)  the  par  value  of 
funded  debt  securities  (pledged  or  unpledged)  issued  or  assumed 
by  the  accounting  company  and  held  by  or  for  it.  In  stating 
the  accounts  on  the  balance-sheet  statement  the  latter  amount 
should  be  deducted  from  the  total  in  order  to  show  only  the  par 
value  of  funded  debt  securities  actually  outstanding  in  the  hands 
of  the  public  at  the  date  of  the  balance-sheet  statement.  (See 
sec.  5,  p.  13.) 

Note  A. — By  funded  debt,  as  the  term  is  here  used,  is  meant  the  par  value  of 
all  bonds,  notes,  and  other  evidences  of  indebtedness  (except  open  accounts  for 
advances)  which,  by  the  termsof  the  creation  of  the  debt,  do  not  mature  until 
more  than  one  year  after  the  date  of  such  creation.  Funded  debt  is  classified 
in  accordance  with  four  principal  characteristics,  viz,  (1)  mortgage  or  other 
lien  or  .security  therefor;  (2)  rate  of  interest;  (3)  interest  dates;  and  (I)  date  of 
maturity.  No  two  amounts  of  fimded  debt  should  be  considered  of  the  same 
class  imless  agreeing  in  all  four  of  the  above  characteristics,  except  that  any 
issue  of  securities  agreeing  in  the  first  three  characteristics  but  maturing 
serially  may  be  treated  as  of  the  same  clas.s.  Where  any  portion  of  the  funded 
debt  rests  only  on  the  general  credit  of  the  corporation  and  is  not  specially 
secured  or  supported  by  lien  of  any  character,  it  should,  for  the  purpose  of  these 
accounts,  be  known  as  a  debenture.  Debentures  include  promissory  notes 
unsecured  by  mortgage  or  other  lien,  and  securities  commonly  known  as  plain 
bonds. 

Note  B.— If  the  consideration  received  for  any  issue  of  funded  debt  is  any- 
thing else  tlian  money,  the  entry  should  .show  the  principal  to  whom  issued  and 
should  describe  with  sullicient  particularity  to  identify  it  the  consideration 
actually  received  for  the  issue.  If  the  issue  is  in  any  case  to  an  agent  of  an 
undisclosed  principal,  the  name  and  business  address  of  such  agent  and  the 
fact  of  his  agency  should  bo  shown  in  the  entry. 

72528°— 15 i 


26 

Note  C— If  the  fair  cash  value  of  the  consideration  realized  upon  the  issue 
of  any  amount  of  funded  debt  securities  is  greater  or  less  tlian  the  par  value  of 
such  securities  plus  the  accrued  interest,  the  difference  should  be  credited  or 
charged  to  an  appropriate  discount-and-premium  account,  and  corresponding 
reference  thereto  should  be  made  in  the  entry  relating  to  such  debt  in  the 

funded  debt  account.    (See  sec.  7,  p.  14.) 

* 

154.  Receivers'  Certificates. 

^^llen  any  receiver  acting  under  the  orders  of  a  court  of  com- 
petent jurisdiction  is  in  possessicfri  of  the  property  of  the  com- 
pany and  under  the  orders  of  such  court  issues  certificates  of 
indebtedness  chargeable  upon  such  property,  the  par  vahie  of 
such  certificates  should  be  credited  to  this  account.  Interest 
accruing  upon  such  certificates  should  also  be  credited  monthly 
to  this  account,  and  when  paid  should  be  charged  to  this  account. 

155.  Advances   from    System    Corporations   for    Construction, 

Equipment,  and  Betterments. 

This  account  should  include  advances  from  controlling,  affili- 
ated, controlled,  and  subsidiary  corporations  to  enable  the  ac- 
counting company  to  pay  for  construction,  equipment,  or  addi- 
tions and  betterments  if  such  advances  are  of  a  permanent  nature 
(i.  e.,  if  there  is  not  an  understanding  that  the  advances  are  to 
be  repaid  within  one  year),  or  if  it  is  understood  and  intended 
that  a  reimbursement  shall  be  made  by  the  issue  of  the  securi- 
ties of  the  debtor  corporation. 

Note  A. — Gifts  from  system  corporations  without  expectation  of  reim- 
bursement should  not  be  credited  to  this  account  but  to  account  No.  401, 
"Miscellaneous  Additions  to  Surplus." 

Note  B.— Temporary  advances  on  open  accounts  from  system  corporations 
and  such  advances  for  purposes  other  than  construction,  equipment,  or 
additions  and  betterments  should  be  included  in  account  No.  160,  "Accounts 
Payable  to  System  Corporations." 

WORKING   LIABILITIES. 

156.  Judgments  Unpaid. 

AMien  any  judgment  of  indebtedness  is  rendered  against  the 
company  by  a  court  of  competent  jurisdiction,  or  any  fine  or 
penalty  requiring  the  payment  of  money  is  assessed  against  the 
company  by  such  a  court,  and  no  appeal  accompanied  by  stay 
of  execution  has  been  taken  therefrom  within  the  time  allowed 
by  law  for  such  appeal,  the  amount  of  such  judgment,  fine,  or 
penalty  should  be  credited  to  this  account,  and  the  entry  should 
designate  the  action  or  suit  as  a  consequence  of  which  such  judg- 
ment is  pronounced  or  such  fine  or  penalty  assessed.  The  designa- 
tion of  the  action  or  suit  should  show  what  court,  the  term  thereof, 
the  parties,  and  the  character  of  the  action  or  suit.  Interest  accru- 
ing upon  any  such  judgment  should  be  credited  monthly  to  this 
account.  \\Tien  payment  is  made  this  account  should  be 
charged. 

Note. — In  case  of  appeal  and  affirmance  in  whole  or  in  part,  from  which 
judgment  of  affirmance  a  further  appeal  lies,  the  same  rule  shall  apply  as  upon 
entry  of  original  judgment. 


27 

157.  Bills  Payable. 

This  account  ehoiild  include  the  par  value  of  all  notes,  drafts, 
and  other  evidences  of  indeVjtednese,  issued  or  assumed  by  the 
company,  and  which  are  payable  on  demand  or  within  a  time 
not  exceeding  one  year. 

Note. — When  loans  from  system  corporations  for  construction  purposes 
are  evidenced  by  demand  or  short-term  notes  intended  later  to  be  exchanged 
for  other  securities,  the  amount  of  such  loans  should  be  included  in  account 
No.  155,  "Advances  from  System  Corporations  for  Construction,  Equipment, 
and  Betterments." 

158.  Audited  Vouchers  and  Wages  Unpaid. 

This  account  should  include  the  amount  of  audited  vouchers  or 
accounts  and  audited  pay  rolls  unpaid  on  the  date  of  the  balance 
sheet.  Include  also  the  amount  of  unclaimed  wages  and  out- 
standing pay  and  time  checks  issued  in  payment  of  wages. 

159.  Subscribers'  Deposits. 

Credit  to  this  account,  as  such  deposits  are  made,  all  cash 
deposited  with  the  company  by  subscribers  for  telephone 
service  as  security  for  the  payment  of  bills.  Deposits  refunded 
should  be  charged  to  this  account  and  credited  to  cash.  Deposits 
applied  to  uncollectible  telephone  bills  should  be  credited 
to  the  account  of  the  subscriber  and  charged  to  this  account. 

160.  Accounts  Payable  to  System  Corporations. 

This  account  shpuld  include  tjie  amounts  owed  to  controlling, 
affiliated,  controlled,  or  subsidiary  corporations  on  open  accounts 
other  than  those  provided  for  in  account  No.  155,  "Advances 
from  System  Corporations  for  Construction,  Equipment,  and 
Betterments." 

161.  Miscellaneous  Accounts  Payable. 

This  account  should  include  all  amounts  owed  to  miscellaneous 
creditors  on  open  accounts  and  not  provided  for  elsewhere. 

162.  Matured  Interest,  Dividends,  and  Rents  Unpaid. 

This  account  should  include  interest  matured  and  unpaid  on 
loans  and  funded  debt  of  the  accounting  company,  and  of  other 
companies,  when  payment  has  been  assumed  by  the  company; 
rents  due  and  unpaid  on  property  held  under  leases;  and  di\'i- 
dends  due  and  payable  on  capital  stock  but  unpaid,  uncalled 
for,  or  unclaimed  at  the  date  of  the  balance  sheet. 

163.  Matured  Funded  Debt  Unpaid. 

This  account  should  include  the  amount  of  matured  mort- 
gage, bonded,  and  other  funded  debt  payable,  but  not  yet  paid, 
including  bonds  drawn  for  redemption  through  the  operation  of 
sinking  and  redemption  fund  agreements. 

164.  Service  Billed  in  Advance. 

WTien  bills  are  made  for  service  to  be  rendered  in  future 
months,  and  the  amount  of  the  bills  is  included  in  account  Xo. 
118,  "Due  from  Subscribers  and  Agents,"  or  other  asset  account 
but  not  in  the  revenue  accounts,  the  proportion  of  the  bills 


28 

applicable  to  future  months  should  be  credited  to  this  account. 
As  the  term  expires  for  which  the  bill  is  made,  the  appropriate 
revenue  account  should  be  credited  and  this  account  debited 
with  the  amount  applicable  to  the  current  month.  When  toll 
coupons  or  tickets  are  sold,  this  account  should  be  credited  with 
the  amount  representing  the  service  to  be  rendered.  At  the 
end  of  each  month  this  account  should  be  charged  and  the 
appropriate  revenue  accounts  credited  with  the  amount  of 
coupons  and  tickets  (less  the  discount,  in  case  coupons  or  tickets 
were  sold  at  a  discount)  redeemed  during  that  month. 

165.  Other  Current  Liabilities. 

This  account  should  include  the  amounts  of  all  current  liabili- 
ties which  are  not  included  in  any  of  the  foregoing  accounts. 
ACCRUED  LIABILITIES  NOT  DUE. 

166.  Taxes  Accrued. 

This  account  should  include  the  amount  of  taxes  accrued  and 
properly  charged  against  income  or  other  accounts  in  excess  of 
the  amount  of  taxes  paid.     (See  sec.  16,  p.  47.) 

167.  Other  Accrued  Liabilities  not  Due. 

This  account  should  include  the  amount  of  interest  on  loans 
and  funded  debt,  including  interest  on  funded  debt  assumed, 
and  rents  under  leases  accrued  to  the  date  for  which  the  bal- 
ance sheet  is  made  but  not  due  until  after  that  date;  divi- 
dends on  stock  declared  ^rior  to  the  date  of  the  balance  sheet 
but  not  payable  until  after  that  date,  and  other  liabilities  (ex- 
cept taxes)  that  have  accrued  to  the  date  of  the  balance  sheet 
but  not  due  until  after  that  date. 

NoTK. — The  interest  accruing  on  any  judgment  against  the  company  or 
upon  any  receivers'  certificate  should  be  credited  to  the  account  to  which 
such  judgment  or  receivers'  certificate  stands  credited. 

DEFERRED  CREDIT  ITEMS. 

168.  Unextinguished  Premium  on  Debt. 

If  the  net  of  the  balances  in  the  discount-and-premium 
accounts  for  all  classes  of  funded  debt  sold  or  exchanged  is  a 
credit  balance,  the  amount  should  be  stated  in  this  account. 
(See  sec.  7,-p.  14.) 

169.  Insurance  and  Casualty  Reserves. 

This  account  should  include  any  specific  appropriation  of 
income  or  surplus  and  such  amounts  as  are  concurrently  charged 
to  account  No.  668,  "Insurance,"  to  cover  self-carried  risks  on 
fire,  fidelity,  boiler,  casualty,  burglar,  and  other  self-carried 
insurance.  Charge  to  this  account  the  proportion  of  losses 
realized  on  items  protected  by  such  self-carried  insurance. 

When  any  admitted  liability  arises  because  of  loss  or  damage 
to  the  property  of  others  or  of  injuries  to  employees  or  other  per- 
sons, the  amount  of  the  liability  may  (if  not  previously  provided 
for  by  insurance  or  self-insurance)  be  charged  to  the  appropriate 


29 

operating  expense  or  other  accounts  and  credited  to  this  account, 
against  which  (in  such  case)  the  actual  cost  of  satisfaction  of  the 
liability  should  bo  charged  when  the  matter  is  determined.  If 
the  extent  of  the  liability  can  not  l»o  ascertained  promptly  after 
the  liability  arises,  it  may  he  estimated  as  accurately  as  prac- 
ticable for  the  purpose  of  determining  the  immediate  charge  to 
the  expense  or  other  appropriate  account,  in  which  case  the 
matter  should  be  adjusted  when  the  extent  of  the  liability  is 
definitely  ascertained.  If  the  los.s  is  of  such  character  that  it  is 
in  whole  or  in  part  indemnifiable  under  any  contract  of  insurance 
carried  by  the  company,  the  indemnifiable  portion  of  the  loss 
should  be  charged  to  the  insurer  and  credited  to  this  account. 

170.  Liability  on  Account  of  Provident  Funds. 

This  account  should  include  any  specific  appropriations  of 
income  or  surplus  and  such  amounts  as  are  charged  to  account 
No.  672,  "Relief  Department  and  Pensions"  to  provide  for  pen- 
sion, benefit  and  other  provident  pajonents. 

This  account  should  also  include  the  ledger  balances  covering 
the  amount  of  cash  and  the  cost  or  book  value  of  securities  and 
other  assets  in  the  hands  of  trustees  or  managers  of  employees' 
pension  funds,  savings  funds,  relief,  hospital,  and  other  associa- 
tion funds  (whether  contributed  by  the  company,  by  employees, 
or  by  others),  when  such  trustees  or  managers  are  acting  for  the 
company  in  the  administration  of  such  funds;  also  the  amount 
of  such  funds  held  in  the  company's  treasury. 
APPROPRIATED  SURPLUS. 

171.  Surplus  Invested  Since  December  31, 1912,  in  Fixed  Capital. 

This  account  should  include  such  amounts  of  surplus  as  are  def- 
initely set  aside  to  cover  expenditures  for  extensions  or  improve- 
ments of  the  fixed  capital  of  the  accounting  company;  such  ap- 
propriations include  those  made  for  the  purpose  of  discharging  the 
principal  (less  the  discount,  if  any,  suffered  at  the  time  of  sale) 
of  any  obligations  incurred  in  the  acquisition  of  any  property 
whose  cost  is  carried  in  the  fixed  capital  accounts.  The  amounts 
credited  to  this  account  should  be  concurrently  charged  to 
account  No.  352,  "Appropriations  of  Income  for  Construction, 
Equipment,  and  Betterments,"  or  No.  415,  "Appropriations  of 
Surplus  for  Construction,  Equipment,  and  Betterments." 

This  account  should  not  include  temporary  appropriations  for 
the  acquisition  of  property  the  cost  of  which  is  intended  later  to 
be  met  by  an  issue  of  securities,  nor  appropriations  for  the  pay- 
ment of  obligations  which  are  intended  to  be  replaced  by  new 
issues. 

172.  Surplus  Invested  in  Sinking  Funds. 

This  account  should  include  appropriations  of  income  or 
surplus  specifically  invested  or  set  aside  in  the  hands  of  trustees 
for  sinking  and  redemption  funds,  including  accretions  to  such 
funds. 


30 

The  amounts  credited  to  this  account  should  be  concurrently 
charged  to  account  No.  350,  "Appropriations  of  Income  to  Sink- 
ing and  Other  Resen-e  Funds,"  or  No.  411,  '"Appropriations  of 
Surplus  to  Sinking  and  Other  Reserve  Funds." 

173.  Other  Surplus  Reserved. 

This  account  should  include  all  appropriations  of  income  or  sur- 
plus held  in  reserve  except  as  covered  by  accounts  Nos.  169,  170, 
171,  and  172.  A  separate  subaccount  should  be  raised  for  each 
reserve,  and  the  entries  in  such  subaccounts  will  be  required 
to  be  shown  separately  in  the  annual  report  to  the  Commission. 

This  account  should  also  include  the  unexpended  balance,  if 
any,  of  appropriations  intended  to  be  invested  in  fixed  capital, 
and  such  appropriations  to  sinking  or  redemption  fund  reserves 
as  are  not  specifically  invested. 

CORPORATE  SURPLUS. 

174.  Corporate  Surplus  Unappropriated. 

Under  this  head  should  be  shown  the  credit  balance,  if  any,  in 
the  Corporate  Surplus  or  Deficit  account.     (See  sec.  17,  p.  56.) 


31 

FIXED   CAPITAL   ACCOUNTS. 

Page. 

100.  Fixed  Capital  Installed  Prior  to  January  1,  1913 3G 

101.  Fixed  Capital  Installed  Since  December  31,  1912 3G 

200.  Intangible  Capital 36 

201.  Organization 36 

202.  Franchises 37 

203.  Patent  Rights 37 

204.  Other  Intangible  Capital 37 

207.  Right  of  Way ' 37 

210.  Land  and  Buildings 38 

211.  Land 38 

212.  Buildings 38 

220.  Central  Office  Equipment 39 

221.  Central  Office  Telephone  Equipment 39 

222.  Other  Equipment  of  Central  Offices 39 

230.  Station  Equipment , 39 

231.  Station  Apparatus 39 

232.  Station  Installations 40 

233.  Interior  Bloch  Wires 40 

234.  Private  Branch  Exchanges 40 

235.  Booths  and  Special  Fittings 40 

241.  Exchange  Pole  Lines 40 

242.  Exchange  Aerial  Cable 40 

243.  Exchange  Aerial  Wire 40 

244.  Exchange  Underground  Conduits 40 

245.  Exchange  Underground  Cable 41 

246.  Exchange  Submarine  Cable 41 

251.  Toll  Pole  Lines 41 

252.  Toll  Aerial  Cable 41 

253.  Toll  Aerial  Wire 41 

254.  Toll  Underground  Conduit 41 

255.  Toll  Underground  Cable 42 

256.  Toll  Submarine  Cable 42 

2G0.  General  Equipment 42 

261.  Office  F}irniture  and  Fixtures 42 

262.  General  Shop  Equipment 42 

263.  General  Store  Equ ipment 42 

264.  General  Stable  and  Garage  Equipment 43 

265.  General  Tools  and  Implements 43 

2C8.  Interest  During  Construction 43 

270.  Undistributed  Construction  Expenditures 43 

271.  Engineering  and  Superintend^ce 43 

272.  Laic  Expenditures  During  Construction 43 

273.  Taxes  During  Construction 44 

274.  Miscella7ieous  Construction  Expenditures 44 


32 

INSTRUCTIONS  PERTAINING  TO  FIXED  CAPITAL 

ACCOUNTS. 

9.  Fixed  capital  defined. — By  the  fixed  capital  of  a  company  (fre- 
quently termed  the  construction  account)  is  meant  the  property,  both 
tangible  and  intangible,  which  is  devoted  to  the  accomplishment  of 
the  principal  purposes  of  its  business,  and  which  has  an  expectation  of 
life  in  service  of  more  than  one  year  from  date  of  installation  in  service 
(exception  being  made  in  the  case  of  hand  tools  and  other  small  porta- 
ble tools  that  may  be  lost  or  stolen). 

Fixed  capital  consists  of  original  capital,  additions,  hett^rvxents ,  and 
replacements,  and  the  cost  thereof  should  be  charged  as  directed  below. 

Original  capital  is  the  fixed  capital  installed  or  acquired  prior  to  the 
beginning  of  regular  operations  by  the  company.  As  applied  to  a  tele- 
phone company  it  includes  the  acquisition  or  construction  of  the  plant 
necessary  to  begin  the  regular  operation  of  an  exchange  or  toll  system. 
The  cost  of  original  capital  should  be  charged  to  the  appropriate  sub- 
accounts under  account  No.  100,  "Fixed  Capital  Installed  Prior  to 
January  1,  1913,"  or  under  account  No.  101,  "Fixed  Capital  Installed 
Since  December  31,  1912." 

Additions  are  structtires,  facilities,  equipment,  and  other  properties 
added  to  those  in  service  at  the  beginning  of  operations,  and  not  taking 
the  place  of  any  property  of  like  purpose  pre\'iously  held  by  the  com- 
pany. The  cost  of  additions  should  be  charged  to  the  appropriate  sub- 
accounts under  account  No.  101,  "Fixed  Capital  Installed  Since  De- 
cember 31,  1912." 

Betterments  are  mechanical  changes  in  structures,  facilities,  or 
equipment  which  have  as  their  primary  aim  and  result  the  making  of 
the  properties  affected  more  useful  or  of  greater  capacity  than  they 
were  at  the  time  of  their  installation  or  acquisition.  The  cost  of  such 
portion  only  of  the  changes  incident  to  betterments  as  will,  when 
added  to  the  original  cost  of  the  property  bettered,  give  the  cost  of 
replacement  or  reconstruction  in  present  condition  of  the  property  as 
bettered  should  be  charged  to  the  appropriate  subaccounts  under 
account  No.  101,  "Fixed  Capital  Installed  Since  December  31,  1912." 
The  remainder  of  the  cost  of  the  change  should  be  classed  as  a  repair 
and  be  charged  to  the  appropriate  operating  expense  accounts. 

Replacements  are  those  installations  of  fixed  capital  which  have  for 
their  purpose  the  substitution  of  one  building,  structure,  piece  of 
equipment,  or  machinery  for  another  which  it  has  become  necessary 
to  retire,  the  sub.stitute  ha\-ing  substantially  no  greater  capacity  than 
the  property  replaced;  also  the  extension  of  life  period  of  frandiises, 
patents,  and  other  intangible  fixed  capital. 

The  cost  of  the  fixed  capital  retired  should  be  credited  to  the  fixed 
capital  accounts  in  which  it  is  carried  and  the  cost  of  the  fixed  capital 
installed  in  place  of  fixed  capital  so  retired  should  be  charged  to  the 
appropriate  subaccounts  under  account  No.  101,  "Fixed  Capital 
Installed  Since  December  31,  1912." 


33 

10.  Costs  to  be  actual  money  costs. — All  charge::*  made  to  fixed  capjiial 
or  other  property  accounts  witli  respect  to  any  property  acquired  on  or 
after  January  1,  1913,  should  be  the  actual  money  costs  of  the  property. 
When  the  consideration  actually  given  for  anything  with  respect  to 
which  a  charge  is  mado'  to  any  fixed  capital  or  other  property  account 
is  anything  other  than  money,  the  actual  consideration  should  be 
described  in  the  entry  with  sufficient  fullness  and  particularity  to 
identify  it,  and  the  amount  charged  should  be  the  actual  money  value 
of  such  consideration  at  the  time  of  the  transaction. 

11.  Interest  accruing  during  construction  period. — Account  Xo. 
268,  "Interest  During  Construction,"'  should  inchide  only  such  pro- 
portion of  the  interest  on  funds  used  for  construction  purposes  and 
of  the  discount  and  expense  on  funded  debt  as  is  equitably  assign- 
able to  the  period  between  the  date  of  the  issuance  of  securities  and 
the  time  when  the  property  acquired  or  the  improvement  made  through 
such  issuance  becomes  available  for  the  service  for  which  it  is  intended. 
The  proportion  of  interest,  discount,  and  expense  thus  chargeable 
should  be  that  which  the  period  prior  to  the  completion  or  coming  into 
service  of  the  facilities  or  improvements  constructed  bears  to  the 
entire  life  of  the  securities  issued. 

12.  Costs  of  labor,  materials,  and  supplies. — The  term  cost  as  used 
in  the  fixed  capital  tor  construction )  accounts  means  the  actual  cost  in 
money  of  labor  and  materials  used  in  construction,  or  the  actual  cost  in 
money  of  property  acquired  after  construction,  or  if  the  consideration 
given  is  other  than  money,  the  actual  money  value  of  such  other  con- 
sideration at  the  time  of  the  purchase.  Cost  of  labor  includes  not  only 
wages,  salaries,  and  fees  paid  employees,  but  also  the  personal  expenses 
of  such  employees  when  borne  by  the  company.  Cost  of  material  and 
supplies  consumed  in  construction  is  the  cost  at  the  places  where  they 
enter  into  construction,  including  cost  of  transportation  and  inspec- 
tion when  specifically  assignable.  If  such  materials  and  supplies  are 
passed  through  storehouses,  their  cost  entered  in  the  account  may  in- 
clude a  suitable  proportion  of  store  expense. 

13.  Plant  and  equipment  and  other  property  purchased. — \\heQ 
any  properly  in  the  form  of  a  going  or  completed  plant  is  purchased,  an 
appraisal  of  the  property  so  acquired  should  be  made,  and  the  different 
constituent  elements  of  the  plant  (and  equipment,  if  any)  or  other 
property  acquired  should  be  appraised  at  their  structural  value;  that 
is  to  say.  at  the  estimated  cost  of  replacement  or  re])roduction  less 
deterioration  to  the  then  existing  conditions  through  wear  and  tear, 
obsolescence,  and  inadequacy.  If  the  actual  money  ^•alue  of  the  con- 
sideration given  for  the  plant  or  other  property  was  at  the  time  of  the 
acquisition  in  excess  of  such  appraised  value,  the  excess  should  be 
charged  to  account  No.  204,  "Other  Intangible  Capital,"  and  the 
appraised  values  of  the  constituent  elements  should  be  charged  to  the 
appropriate  fixed  capital  accounts  as  hereinafter  designated.  If  the 
actual  money  value  of  the  consideration  given  was  not  in  excess  of 

72528°— 15 5 


34 

<uch  appraised  value,  such  actual  money  value  should  be  distributed 
through  the  said  accounts  in  proportion  to  the  said  appraised  value  of 
the  constituent  elements  appropriate  to  the  respective  accounts. 

Companies  should  be  prepared  to  furnish  the  Commission,  upon  de- 
mand, a  full  report  of  the  contract  of  acquisition,  the  consideration 
given  therefor,  the  determination  of  the  actual  money  value  of  such 
consideration  if  other  than  money,  the  appraisal,  and  the  amounts 
charged  to  the  respective  accounts  for  each  plant  or  other  such  fixed 
capital  purchased.  The  purchaser  is  required  to  procure  in  connection 
with  the  acquisition  of  any  such  plant  or  other  fixed  capital  all  exist- 
ing records,  memoranda,  and  accounts  in  the  possession  or  control  of 
the  grantor  relating  to  the  construction  and  improvement  of  such 
plant,  and  to  preserve  such  records,  memoranda,  and  accounts  until 
authorized  by  law  to  destroy  or  otherwise  dispose  of  them. 

14.  Fixed  capital  withdrawn  or  retired. — (a)  When  any  tangible 
fixed  capital  acquired  prior  to  January  1,  1913,  is  withdrawn  or 
retired  from  service  for  any  cause,  the  amount  at  which  it  stands 
charged  should  be  credited  to  the  subaccount  under  account  No.  100, 
"Fixed  Capital  Installed  Prior  to  January  1,  1913,"  in  which  it  is 
charged,  and  such  amount,  plus  the  expenses  incident  to  the  retire- 
ment, less  the  value  of  salvage,  should  be  charged  (1)  to  account 
No.  102,  "Reserve  for  Accrued  Depreciation — Cr."  for  the  proportion 
applicable  to  the  period  covered  by  the  reserve,  and  (2)  to  account 
No.  413,  "Realized  Depreciation  not  Covered  by  Reserves"  for  the 
remainder.  Such  portion  only  of  the  realized  depreciation  shall  be 
charged  to  account  No.  102,  as  is  due  to  life  in  ser\'ire  during  the  period 
for  which  the  reserve  was  established;  this  portion  may  be  estimated 
on  the  basis  of  the  proportion  which  the  life  in  service  of  the  property 
in  question  after  that  date  bears  to  its  entire  life  in  8er-\ace.  ' 

The  entry  of  the  credit  to  the  fixed  capital  account  should  cite  by 
name  and  page  of  book  or  other  record  the  original  entry  of  cost  of  the 
tiling  withdrawn.  If  there  is  no  such  original  entry,  that  fact  should 
be  stated  in  connection  with  the  credit  entry,  and  the  actual  amount 
originally  charged  should  be  credited.  If  such  amount  is  not  known,  it 
should  be  estimated,  the  facts  upon  which  the  estimate  is  based  and  the 
name  of  the  person  by  whom  estimated  should  be  shown,  and  the 
amount  thus  estimated  to  be  equivalent  to  the  original  charge  in 
respect  of  such  thing  withdrawn  should  be  credited  to  the  fixed  capital 
accounts  involved. 

(6)  \Vhen  any  tangible  fixed  capital  acquired  subsequent  to  Decem- 
ber 31,  1912,  is  withdrawn  or  retired  from  service  for  any  cause  the 
amount  at  which  it  stands  charged  should  be  credited  to  the  fixed 
capital  account  in  which  it  is  charged,  and  such  aniount,  plus  the 
expenses  incident  to  the  retirement,  less  the  value  of  salvage,  should 
be  charged  to  account  No.  102,  "Reserve  for  Accrued  Deprecia- 
tion—Cr." 


35 

Tlie  entry  oi  the  credil  lu  llic  fixed  capital  account  should  cite  by 
name  and  page  of  Ijook  or  other  record  the  original  entry  of  cost  of  the 
thing  withdrawn. 

(c)  If  the  age  of  tangible  fixed  cai)iUil  withdrawn  or  retired  from 
service  can  not  be  d-terrained  for  classification  between  account  Xo. 
100,  "Fixed  Capital  Installed  Prior  to  January  1,  1913,"  and  account 
No.  101,  "Fixed  Capital  Installed  Since  December  31,  1912,"  the 
property  so  retired  should  be  treated  as  having  been  charged  to  the 
former  account,  and  the  necessary  credits  should  be  made  to  the 
subaccounts  thereunder. 

(d)  When  any  fixed  capital  is  withdrawn  or  retired  whose  book  value 
as  carried  in  the  fixed  capital  accounts  has  been  reduced  by  writing 
off  estimated  depreciation,  only  that  part  of  the  realized  depreciation 
which  has  not  already  been  written  off  should  be  charged  to  account 
No.  102,  "Reserve  for  Accrued  Depreciation — Cr.,"  or  to  account  No. 
413,  "Realized  Depreciation  not  Covered  by  Reserves." 

(e)  \Mien  any  fixed  capital  is  withdrawn  or  retired  whose  book  value 
is  greater  than  the  known  or  estimated  cost,  such  excess  ghould  be 
charged  to  account  No.  417,  "Other  Deductions  from  Surplus,"  and  the 
realized  depreciation  should  be  charged  as  elsewhere  directed. 

(/)  If  any  fixed  capital  is  sold  for  more  than  its  original  cost,  the 
amount  of  depreciation,  if  any,  accrued  and  credited  to  a  reserve  in 
respect  thereof,  should  be  determined  as  accurately  as  possible  and 
charged  to  such  reserve.  The  sum  of  the  amount  so  charged  and  the 
excess  of  the  selling  price  over  the  cost  of  the  property  should  be 
credited  to  account  No.  401,  "Miscellaneous  Additions  to  Surplus." 


36 

TEXT  EXPLANATORY  OF  FIXED  CAPITAL  ACCOUNTS. 

100.  Fixed  Capital  Installed  Prior  to  January  1,  1913. 

This  account  is  a  summary  of  those  accounts  which  include 
the  fixed  capital  of  the  company  installed  prior  to  January  1, 
1913,  and  which  is  still  in  ser\'ice  at  the  date  of  the  balance  sheet. 

The  accounts  representing  the  fixed  capital  of  the  company 
as  carried  onits  books  at  the  close  of  December  31,1912,  should  be 
so  designated  upon  the  books  of  the  company  as  to  show  clearly 
that  they  relate  only  to  fixed  capital  installed  prior  to  the  close 
of  that  date.  No  debits  should  be  made  to  such  accounts  with 
respect  to  any  property  subsequently  acquired,  but  the  cost  of 
such  property  should  be  charged  to  the  accounts  hereinafter 
provided.     (See  sec.  9,  p.  32,  and  note  under  account  No.  101.) 

Note. — In  the  reports  to  the  Commission  a  statement  will  be  required  show- 
ing the  names  of  the  accounts  for  fixed  capital  actually  carried  by  the  company 
on  December  31, 1912,  and  the  balances  therein  at  the  date  of  the  report. 

101.  Fixed  Capital  Installed  Since  December  31,  1912. 

This  account  is  a  summary  of  accounts  Nos.  200  to  274,  inclu- 
sive, which  include  the  cost  of  fixed  capital  installed  since 
December  31,  1912.  The  sum  of  the  balances  in  accounts  Nos. 
200  to  274,  inclusive,  as  provided  hereinafter,  should  be  shown 
on  the  balance-sheet  statement  under  this  account.  (See  sec.  9, 
p.  32.) 

Note. — If  the  accounts  of  a  telephone  company  have  been  kept  as  pre- 
scribed by  a  State  commission  and  it  is  possible  to  close  the  fixed  capital 
accounts  substantially  into  the  primary  fixed  capital  accounts  prescribed 
hereinafter,  it  will  not  be  necessary  to  separate  the  fixed  capital  accounts  as 
of  January  1,  1913,  but  the  primary  accounts  under  account  No.  101  may 
include  the  fixed  capital  accounts  since  the  effective  date  of  supervision  by 
the  State  commission,  and  the  dates  in  the  titles  of  accounts  Nos.  100  and  101 
may  be  changed  accordingly. 

200.  Intangible  Capital. 

This  account  should  include  the  cost  of  intangible  capital,  as 
provided  for  in  the  following  subaccounts: 
201.  Organization. 

This  account  should  include  all  fees  paid  to  governments  for 
the  privilege  of  incorporation,  and  all  office  and  other  expendi- 
tures incident  to  organizing  the  company  or  other  enterprise  and 
putting  it  in  readiness  to  do  business.  This  includes  the  cost 
of  preparing  and  distributing  prospectuses,  the  cost  of  soliciting 
subscriptions  for  stock  (but  not  for  loans  nor  for  the  purchase  of 
bonds  or  other  evidence  of  indebtedness),  cash  fees  paid  to  pro- 
moters, and  the  actual  cash  value  at  the  time  of  organization  of 
securities  paid  to  promoters  for  their  services  in  organizing  the 
enterprise;  counsel  fees;  cost  of  preparing  and  issuing  certifi- 
cates of  stock,  and  cost  of  procuring  certificates  of  necessity  from 
State  authorities,  and  other  like  costs. 


37 

202.  Franchises. 

This  account  should  include  the  amount  (exclusive  of  any  tax 
or  annual  chaise)  actually  paid  to  governments  as  the  considera- 
tion for  the  grant  of  such  franchise  or  right  as  is  necessary  to  the 
conduct  of  the  company's  telephone  operations.  If  any  such 
franchise  is  acquired  by  assignment,  the  charge  to  this  ac- 
count in  respect  thereof  should  not  exceed  the  amount  actually 
paid  therefor  by  the  company  to  its  assignor,  nor  should  it 
exceed  the  amount  actually  paid  the  government.  Any  excess 
of  the  amount  actually  paid  by  the  company  over  the  amount 
paid  by  the  original  grantee  to  the  grantor  of  tne  franchise  should 
be  charged  to  account  No.  204,  "Other  Intangible  Capital." 
If  any  such  franchise  has  a  life  of  not  more  than  one  year  after 
the  date  when  it  is  first  exercised  by  the  company,  it  should 
not  be  charged  to  this  account,  but  to  the  appropriate  accounts 
in  operating  expenses,  or  in  account  No.  128,  " Prepayments,  "- 
if  extending  beyond  the  fiscal  year. 

Note.— Annual  or  more  frequent  payments  in  respect  of  franchises  must 
not  be  charged  to  this  account,  but  to  the  appropriate  tax  or  operating  expense 
account. 

203.  Patent  Rights. 

This  account  should  include  the  cost  of  all  rights  (ha\-lng  a 
life  of  more  than  one  year  from  the  date  when  placed  in  ser\dce) 
acquired  by  the  company  in  or  under  valid  patents  granted  by 
the  United  States  to  inventors  for  inventions  and  discoveries 
in  connection  with  the  conduct  of  the  company's  telephone 
operations. 

204.  Other  Intangible  Capital. 

This  account  should  include  the  cost  of  all  other  property  com- 
ing within  the  definition  of  intangible  cai)ital  and  de\oted  to 
telephone  operations.  Entries  of  charges  to  this  account  should 
describe  the  acquired  property  with  suflicient  particularity 
clearly  to  identify  it,  and  should  also  show  specifically  the  prin- 
cipal from  whom  acquired  and  all  agents  representing  such 
principal  in  the  transaction;  also  the  term  of  life  of  such  prop- 
erty, estimated  if  not  known,  and,  if  estimated,  the  facts  upon 
which  the  estimate  is  based.  (See  sec.  13,  p.  33.) 
207.  Right  op  Way. 

This  account  should  include  the  cost  of  all  land  and  interests 
in  land  acquired  for  the  location  of  telephone  wires,  cables,  pole 
lines,  and  conduits;  salaries  and  expenses  of  right-of-way  agents; 
expenses  of  appraisals  and  of  juries,  commissioners,  or  arbitra- 
tors in  condemnation  cases;  real-estate  brokers'  commissions; 
cost  of  plats,  abstracts,  notarial  fees,  examination  of  title,  re- 
cording deeds,  etc. 

This  account  should  also  include  the  first  cost  of  acquiring 
leaseholds  of  land  for  right  of  way,  the  terms  of  which  are  more 


74016 


38 

than  one  year  each,  whether  acquired  through  direct  lease, 
assignment,  or  otherwise  (biit  not  including  the  rents  paid 
periodically  in  consideration  of  rights  obtained  under  such 
leases).  If  any  such  leasehold  is  acquired  by  assignment,  the 
charge  to  this  account  must  not  exceed  the  amount  actually 
paid  therefor  by  the  accounting  company  to  the  assignor. 
210.  Land  and  Buildings. 

This  account  should  include  the  cost  of  land  and  buildings 
as  provided  for  in  the  following  subaccounts: 

211.  Land. 

This  accoimt  should  include  the  cost  of  all  land  and  interests 
in  land,  other  than  right  of  way,  acquired  for  use  in  the  opera- 
tion of  the  telephone  plant,  such  as  land  occupied  by  general 
and  central  offices,  shops,  stables,  garages,  storehouses,  etc.  It 
includes  the  cost  of  examination  and  registration  of  title,  con- 
veyancer's and  notary's  fees,  purchasing  agent's  commissions  or 
proportion  of  purchasing  agent's  salary,  taxes  accrued  to  date  of 
transfer  of  title,  and  all  liens  upon  the  title,  when  such  costs 
are  assumed  or  paid  by  the  purchaser  in  his  own  behalf;  cost 
of  assessments  for  public  improvements  which  add  to  the  value 
of  the  lands  but  which  are  not  the  property  of  the  accounting 
company;  cost  of  grading  land  when  not  done  in  connection 
with  buildings;  and  costs  of  obtaining  consents  and  payments 
for  abutting  damages  and  expenses  of  condemnation  jDroceedings. 

This  account  should  also  include  the  first  cost  of  acquiring 
leaseholds  of  land,  other  than  for  right  of  way,  the  terms  of 
which  are  more  than  one  year  each,  whether  acquired  through 
direct  lease,  assignment,  or  otherwise  (but  not  including  the 
rents  paid  periodically  in  consideration  of  rights  obtained  under 
such  leases).  If  any  such  leasehold  is  acquired  by  assignment, 
the  charge  to  this  account  must  not  exceed  the  amount  actually 
paid  therefor  by  the  accounting  company  to  the  assignor. 

Note. — Cost  of  buildings  and  other  improvements  (except  as  specified 
above)  should  not  be  included  in  this  subaccount.  If  at  the  time  of  acquisi- 
tion of  an  interest  in  land  such  interest  extends  to  buildings  or  other  im- 
provements thereon,  which  improvements  are  devoted  by  the  company  to 
telephone  operations,  and  if  the  price  of  such  improvements  is  not  deter- 
mined by  the  contract,  the  buildings  or  improvements  should  be  appraised 
at  their  fair  cash  value  for  use  in  such  operations,  and  such  appraised  value 
shall  be  charged  to  account  No.  212,  "Buildings."  If  such  improvements 
are  devoted  to  operations  other  than  telephone  or  held  as  Investments,  the 
cost  (or  the  appraised  value,  if  the  cost  is  not  determined  in  the  contract 
of -acquisition)  should  be  charged  to  accoimt  No.  Ill,  "Miscellaneous 
Investments."  If  the  improvements  are  removed  or  wrecked,  the  salvage 
(less  the  cost  of  removal  or  wreckage)  should  be  credited  to  this  account. 

212.  Buildings. 

This  account  should  include  the  cost  of  all  buildings,  such  as 
general  and  central  offices,  shops,  stables,  garages,  storehouses, 
etc.,  devoted  to  the  general  purposes  of  the  company;  also  of  all 


39 

permanent  fixture?!,  sueh  as  water,  steam,  and  pas  pipes  and  fix- 
tures; electric  wiring  and  fixtures  for  liphtiuf,',  signaling,  etc.; 
elevators  and  the  engines  and  motors  specially  provided  for  oper- 
ating them;  furnaces,  boilers,  and  other  apparatus  provided  f(jr 
producing  steam  for  such  engines  and  for  heating;  electric  genera- 
tors specially  provided  for  ])roducing  current  for  lighting  such 
buildings,  etc.  This  account  includes  such  piers  and  other  foun- 
dations for  machinery  and  apparatus  as  are  designed  to  be  as  per- 
manent as  the  buildings  in  (or  in  connection  with)  which  they 
are  constructed,  and  to  outlast  the  first  machinery  or  apparatus 
mounted  thereon.  It  also  includes  the  cost  of  real-estate  brokers' 
commissions,  exaTuinations  and  registrations  of  titles,  and  other 
expenses,  such  as  architects'  fees,  supervision,  etc.,  incident  to 
the  construction  or  purchase  of  buildings;  and  the  cost  of  grad- 
ing and  of  sidewalks,  fences,  hedges,  etc.,  on  grounds  used  in 
connection  with  such  buildings.  It  does  not  include  any  tele- 
phone ecjui])nient,  wiring,  or  apparatus  for  generating  or  con- 
trolling electricity  for  operation  of  the  telephone  system. 
220.  Central  Office  Equipment. 

This  account  should  include  the  cost  of  all  central  office 
equipment,  as  follows: 

221.  Central  Office  Telephone  Equipment. 

This  account  should  include  the  cost  of  local  and  toll  switch- 
boards, chief  operators',  monitors',  and  supervisors'  desks  and 
tables,  wire  chiefs'  testing  outfits,  main  and  intermediate  frames, 
cables,  and  jumper  wires,  call  registers  or  meters,  relay  racks 
and  coil  racks,  and  power  plants,  including  rectifiers,  generators, 
engines,  motors,  batteries,  power  switchboards,  meters,  and 
fuse  boards;  telephone  and  telegraph  instruments,  and  other 
electrical  instruments  and  apparatus  in  the  central  office  de- 
voted to  the  operation  of  the  telephone  plant. 

222.  Other  Equipment  of  Central  Offices. 

This  account  should  include  the  cost  of  furniture  and  equip- 
ment (other  than  telephone  equipment)  in  central  offices  for  the 
operating  forces.  This  account  includes  the  furniture  and 
equipment  in  operators'  rest  and  lunch  rooms,  and  in  operator^ 
schools. 
230.  Station  Equipment. 

This  account  should  include  the  cost  of  all  telephone  ternanal 
equipment  installed  in  service,   either  for  subscribers  or  toi 
company  use,  including  the  cost  of  installation,  as  follows: 
231.  Station  Apparatus. 

This  account  should  include  the  cost  of  station  apparal  us,  such 
as  telephone  sets,  intercommunicating  sets,  bells,  backboards, 
desk  stands,  coin  boxes,  protectors,  battery  boxes,  initial  butteries 
and  cords,  special  station  switching  devices  not  othenvise  classi- 
fied, and  telephone  and  telegraph  instruments  or  parts  thereof 
when  owned  by  the  company  and  installed  for  service. 


40 

232.  Station  Installations. 

This  account  should  include  the  cost  of  installing  station  appa- 
ratus and  the  cost  of  inside  wires;  that  is,  the  wires  (or  cables)  from 
the  instruments  to  the  point  of  entrance  to  the  building,  where 
the  drop  wires  or  interior  block  wires  terminate,  or  to  the  junc- 
tion boxes,  where  the  house  cable  or  other  cable  terminates, 
including  wires  on  the  same  premises  to  connect  main  and  ex- 
tension stations,  or  to  connect  the  private  branch  exchange 
distributing  frames  with  their  terminal  stations. 

233.  Interior  Block  Wires. 

This  account  should  include  the  cost  of  interior  block  wires  (or 
cables)  from  the  point  of  entrance  to  the  building,  where  con- 
nection is  made  with  the  inside  wires,  to  the  point  of  connec- 
tion with  the  permanent  circuits  at  the  terminals  (block  cable 
boxes)  of  the  subsidiary  underground  cable  or  subsidiary  aerial 
cable. 

234.  Private  Branch  Exchanges. 

This  account  should  include  the  cost  of  private  branch  ex- 
change switchboards,  their  distributing  frames,  the  cables 
connecting  such  switchboards  and  distributing  frames,  and  the 
cost  of  installation. 

235.  Booths  and  Special  Fittings. 

This  account  should  include  the  cost  of  booths  and  special 
fittings,  such  as  desks,  chairs,  fans,  and  cash  registers,  and 
the  cost  of  installation. 

241.  Exchange  Pole  Lines.' 

This  account  should  include  the  cost  of  poles,  towers,  cross 
arms,  pins,  brackets,  braces,  guy  wire,  guy  stubs,  and  other 
materials  used  in  the  construction  of  exchange  service  pole  lines; 
also  the  cost  of  first  clearing  right  of  way. 

242.  Exchange  Aerial  Cable.' 

This  account  .should  include  the  cost  of  cables  devoted  to  ex- 
change service  including  the  cost  of  suspension  wire,  cable  clips 
and  rings,  cable  boxes  and  fittings,  pole  seats  and  platforms, 
loading  coils,  pot  heads,  protectors,  sleeves,  and  other  material 
used  in  hanging  such  cables. 

243.  Exchange  Aerial  Wire.' 

This  account  should  include  the  cost  of  exchange  ser\dce 
wires,  including  insulators,  sleeves,  and  other  materials  used  in 
attaching  such  wires  to  the  insulators.  The  exchange  wire  in- 
cludes the  drop  wire  leading  from  the  overhead  plant  to  the 
point  of  entrance  to  the  building. 

244.  Exchange  Underground  roNDUiT.s.' 

This  account  should  include  the  cost  of  exchange  service 
conduits,  including  the  cost  of  pipe,  cement,  manholes,  man- 


» If  plant  is  used  both  for  exchange  and  toll  service,  the  principal  ase  of  such  plant 
should  determine  its  classification. 


41 

hole  furnii^hings,  and  otlior  materials  used,  the  cost  of  ronnee- 
tiona  to  poles  and  buildings,  repaying,  and  other  costs  incident 
to  the  fnstallation  of  such  conduits. 

245.  Exchange  Uxderground  ("able.  * 

This  account  should  include  the  cost  of  exchange  service 
underground  cable.s,  including  cable  boxes  and  fittings,  loading 
coils,  and  other  materials  used  in  the  work  of  installing  such 
cables,  and  other  cost  incident  thereto. 

This  account  should  include,  in  addition  to  the  main  exchange 
underground  cable,  the  subsidiary  cables  through  laterals  to  pole 
or  building  terminals;  the  subsidiary  cables  to  the  interior  of 
city  blocks  for  connection  with  interior  block  wires;  and  the 
subsidiary  cables  entering  vertically  (as  house  cables)  into  build- 
ings for  connection  there  with  inside  wires. 

Note. — Hoase  cables  are  considered  to  be  vertical  extensions  of  under- 
ground cables  or  plant  similar  thereto.  They  do  not  Inelude  the  inside  wires 
extending  from  terminal  bo.xes  of  house  cables  to  subscribers'  stations,  nor 
the  cables  for  subscribers'  private  branch  exchange  switchboards  which  are 
included  in  accoimt  No.  232,  "Station  Installations." 

246.  Exchange  Submarine  Cable. ^ 

This  account  should  include  the  cost  of  exchange  submarine 
cable,  cable  towers,  loading  coils,  cable  boxes  and  fittings,  and 
other  materials  used  in  the  installation  of  such  cables,  and  other 
costs  incident  thereto. 

251.  Toll  Pole  Lines.' 

This  account  should  include  the  cost  of  poles,  towers,  cross 
arm.'^,  pins,  brackets,  braces,  guy  wire,  guy  stubs,  and  other 
materials  used  in  the  construction  of  toll-service  pole  lines;  also 
the  cost  of  first  clearing  right  of  way. 

252.  Toll  Aerial  Cable.' 

This  account  shotdd  include  the  cost  of  cables  devoted  to  toll 
service,  including  the  cost  of  suspension  wire,  cable  clips  and 
rings,  cable  boxes  and  fittings,  pole  seats  and  platforms,  loading 
coils,  pot  heads,  protectors,  sleeves,  and  other  materials  used  in 
hanging  such  cables. 

253.  Toll  Aerial  Wire.' 

This  account  should  include  the  cost  of  toll-service  wires, 
including  insidators,  sleeves,  and  other  materials  used  in  at- 
liuliing  such  wires  to  the  insulators. 

254.  Toll  Undergrou.nd  Conduit.' 

This  account  should  include  the  cost  of  toll-service  conduit^?, 
including  the  cost  of  pipe,  cement,  manholes,  manhole  furnish- 
ings, and  other  materials  used,  the  cost  of  connections  to  poles 
anil  buildings,  fe2)aving,  and  other  costs  incident  to  the  installa- 
tion of  such  conduits. 

I  If  plant  is  used  both  for  exchange  and  toll  service,  the  principal  use  of  such  plant 
should  determine  its  classification. 


42 

255.  Toll  Underground  Cable. ^ 

This  account  should  include  the  cost  of  toll-service  under- 
ground cables,  including  cable  boxes  and  fittings,  loading  coils, 
and  other  materials  used  in  the  work  of  installing  such  cables, 
and  other  costs  incident  thereto. 

256.  Toll  Submarine  Cable.' 

This  account  should  include  the  cost  of  toll  submarine  cable, 
cable  towers,  loading  coils,  cable  boxes  and  fittings,  and  other 
materials  used  in  the  installation  of  such  cables,  and  other  costs 
incident  thereto. 
260.  General  Equipment. 

This  account  should  include  the  cost  of  the  equipment  classi- 
fied in  the  subaccounts  hereunder.  Items  of  small  value  or  short 
life,  such  as  portable  tools  liable  to  be  lost  or  stolen,  temporary 
shelving^  waste  baskets,  gloves,  whips,  and  the  like,  should  not 
be  included  in  this  account  or  the  subaccounts  hereunder  but 
should  be  charged  direct  to  the  operating  expense  accounts  or 
to  the  clearing  accoimts. 

261.  Office  Furniture  and  Fixtures. 

This  account  should  include  the  cost  of  desks,  tables,  chairs, 
carpets,  cases,  movable  partitions,  railings,  shelves,  typewriters, 
addressing  machines,  adding  machines,  and  other  ofiice  devices; 
stoves,  portable  gas  and  electric  fixtures,  and  other  office  fittings 
(except  fittings  considered  a  part  of  the  building  as  provided  for 
in  account  No.  212,  "  Buildings,  "  and  telephone  equipment  pro- 
vided for  under  account  No.  220,  "  Central  Office  Equipment. ") 

262.  General  Shop  Equipment. 

This  account  should  include  the  cost  of  all  equipment  spe- 
cially jjrovided  for  general  shops,  such  as  engines,  gas  pro- 
ducers, electric  generators,  and  other  power  apparatus  used  in 
operating  machinery  in  such  shops;  machine  tools,  shafting, 
belts,  and  Hke  shop  equipment;  also  such  smithing  equip- 
ment in  general  shops  as  is  used  principally  for  general  pur- 
poses other  than  shoeing  horses  and  repairing  vehicles. 

Note. — Hand  and  other  small  portable  tools  liable  to  be  lost  or  stolen 
should  not  be  included  herein,  but  portable  tools  and  apparatus  of  special 
value  may  be  charged  to  this  account  and  remain  herein  so  long  as  record 
is  kept  of  such  tools  and  apparatus. 

263.  General  Store  Equipment. 

This  account  should  include  the  cost  of  all  equipment  of  general 
store  structures,  such  as  movable  counters,  movable  shelving,  and 
other  movable  equipment  of  like  nature;  carts,  barrows,  trucks, 
tools,  etc.,  and  other  apparatus  and  appliances  used  in  han- 
dling, storing,  or  packing  materials  and  supplies. 

Note.— Counters,  shelving,  and  the  like  which  are  permanently  attached 
to  the  structure  should  be  charged  to  account  No.  212,  "Buildings."  and 
not  to  this  account. 


» If  plant  is  ased  both  for  exchange  and  toll  service,  the  principal  use  of  such  plant 
should  determine  its  classification. 


43 

264.  General  Stable  and  Garage  Equipment. 

This  account  should  inchide  the  cost  of  all  equipment  of  gen- 
eral stables,  including  horses,  harness,  drays,  wagons,  automobiles 
and  other  vehicles;  eciuipment  of  shoeing  shops,  harness-repair 
shops,  vehicle-repair  slKjpH,  etc. 

265.  General  Tools  and  Implements. 

This  account  should  include  the  cost  of  portable  testing  ap- 
paratus and  valuable  tools  and  implements  devoted  to  the  main- 
tenance or  construction  of  the  telephone  })lant  and  not  provided 
for  in  the  equipment  accounts.  This  does  not  include  tools  not 
yet  in  use  carried  as  supplies  unissued. 
268.  Intekest  Duiung  Co.vstkuction. 

This  account  should  include  the  interest  upon  all  moneys  (and 
credits  available  upon  demand)  devoted  to  the  construction  and 
equipment  of  the  property  from  the  time  of  such  devotion  until 
the  construction  is  ready  for  use.  Interest  receivable  accrued 
upon  such  moneys  (and  upon  such  credits)  should  be  credited 
to  this  account. 

If  any  property  with  respect  to  which  an  interest  charge  is 
included  in  this  account  is  withdrawn  or  retired  from  serv'ice, 
the  amount  of  such  interest  (estimated,  if  not  known)  should  be 
csedited  to  this  account  and  charged  off  as  a  part  of  the  original 
cost  of  the  property  so  retired.  No  interest  upon  expenditures 
for  replacements  or  reconstruction  should  be  included  in 
this  account  or  any  other  fixed  capital  account  unless  proper 
credits  are  made  to  the  appropriate  fixed  capital  accounts  for 
any  interest  included  in  such  accounts  in  respect  of  the  property 
retired  or  withdrawn.  (See  sec.  11,  p.  33.) 
270.  Undistributed  Construction  Expenditures. 

This  account  should  include  the  expenditures  provided  for  in 
the  following  subaccounts  when  such  expenditures  can  not  be 
satisfactoril}-  allocated  to  the  fixed  capital  accounts  to  which  they 
relate.  Upon  the  retirement  or  withdrawal  of  any  property  with 
respect  to  which  any  charge  is  included  in  this  account  or  any 
subaccount  hereunder,  there  should  be  credited  to  this  account 
or  the  appropriate  subaccount  such  part  of  the  undistributed  ex- 
penditures during  construction  (estimated,  if  not  known)  as  may 
be  apj)licable  to  the  property  withdrawn  or  retired. 

271.  Engineering  and  Siiperintendenee. 

This  account  should  include  all  expenditures  for  services  and 
expenses  of  engineers,  draftsmen,  and  superintendents  employed 
on  preliminary  and  construction  work  when  the  expenditures  can 
not  be  assigned  to  specific  construction  accounts. 

272.  Law  Expenditures  During  Construction. 

This  account  should  include  general  law  expenditures  incurred 
in  the  construction  of  the  telephone  plant,  such  as  the  pay  and 
expenses  of  counsel,  solicitors,  and  attorneys,  their  clerks  and 
attendants,  and  expensesof  their  offices;  the  cost  of  printing  briefs, 


44 

legal  forms,  testimony,  reports,  etc.;  payments  to  arbitrators  for 
the  settlement  of  disputed  questions;  cost  of  suits  and  payments 
of  special  fees,  notarial  fees,  and  witness  fees,  and  other  court  ex- 
penses. When  any  of  the  expenditures  enumerated  herein  can 
be  chai-ged  du-ectly  to  the  account  for  which  incun-ed,  they 
should  be  so  charged  and  not  to  this  account.  Expenditures 
incurred  in  connection  with  the  acquisition  of  right  of  way 
should  be  charged  to  account  No.  207,  "Right  of  Way,"  and  in 
the  acquisition  of  other  land  to  account  No.  211,  "Land." 
Law  expenditures  in  connection  with  the  organization  of  the  cor- 
poration should  be  charged  to  account  No.  201,  "Organization." 

273.  Taxes  During  Construction. 

This  account  should  include  all  taxes  and  assessments  levied 
and  paid  on  property  belonging  to  the  company  while  under  con- 
struction and  before  ths  plant  is  opened  for  operation,  except 
special  taxes  assessed  for  street  and  other  improvements,  such 
as  grading,  sewering,  curbing,  guttering,  paving,  sidewalks,  etc., 
which  should  be  charged  to  the  account  to  which  the  property 
benefited  is  charged. 

274.  Miscellaneous  Construction  Expenditures. 

This  account  should  include  salaries  and  expenses  of  executive 
and  general  officers  of  the-  telephone  company  before  it  is  ready 
to  begin  operations;  clerks  in  general  offices  engaged  on  construc- 
tion accounts  or  work;  rent  and  repair  of  general  offices  when 
rented,  with  the  office  expenses;  insurance  during  construction; 
also  construction  and  equipment  items  of  a  special  and  incidental 
nature  which  can  not  properly  be  charged  to  any  other  fixed 
capital  account. 

Note  A.— This  account  may  include  asuitable  proportion  of  supply  expenses 
when  such  expenses  are  not  assignable  to  specific  materials. 

Note  B.—Thisaceount  should  not  include  any  costs  of  organization,  or  any 
costs  or  discounts  connected  with  the  issue  and  disposal  of  stocks,  bonds,  or 
other  securities,  or  commercial  paper. 


45 

INCOME  STATEMENT. 

I.  OPEEATING  INCOME. 

Page. 

300.  Telephoxe  Opeu.^tixg  Reve.nues 48 

301.  Telephone  Operating  Expense.s 48 

Net  Telephone  Operating  Revenues  (or  Deficit). 

302.  Other  Operating  Revenue.s 48 

303.  Other  Operating  Expenses 48 

304.  Uncollectible  Operating  Revenues 48 

305.  Taxes  Assignable  to  Operations 49 

Operating  Income  (or  Loss). 

II.  nonoperati/g  EEVENUES. 

310.  Rent  Revenues  from  Lease  of  Telephone  Plant —  49 

311.  Miscellaneous  Rent  Revenues 49 

312.  Dividend  Revenues 49 

313.  Interest  Revenues 49 

314.  Sinking  and  Other  Reserve  Fund  Accretions 50 

315.  Profits  from  Operations  of  Others 50 

316.  Miscellaneous  Nonoperating  Revenues 50 

in.  NONOPERATING  REVENUE  DEDUCTIONS. 

320.  Rent  Expense 51 

321.  Miscellaneous  Nonoperating  Expense 51 

322.  Nonoperating  Taxes 51 

323.  Uncollectible  Nonoperating  Revenues 51 

IV.  DEDUCTIONS  PROM  GROSS  INCOME. 

330.  Rent  Deductions  for  Lease  of  Telephone  Plant 51 

331.  Rent  Deductions  for  Telephone  Offices 51 

332.  Rent   Deductions   for  Conduits,   Poles,   and   Other 

Supports 52 

333.  Rent  Deductions  for  Instruments  and  Equipment.  . .  52 

334.  Miscellaneous  Rent  Deductions 52 

335.  Interest  Deductions  for  Funded  Debt 52 

336.  Other  Interest  Deductions 52 

337.  Loss  on  Operations  of  Others : 53 

338.  Amortization  of  Debt  Discount  and  Expense 53 

339.  Release  of  Premiums  on  Debt — Cr 53 

340.  Amortization  of  Landed  Capital 53 

341.  Miscellaneous  Deductions  from  Income 53 

Net  Income  (or  Loss).  ' 


46 
Y.  DISPOSITION  OF  NET  INCOME. 

Page. 

350.  Appropriations    of    Income    to    Sinking    and    Other 

Reserve  Funds 53 

351.  Dividend  Appropriations  of  Income 54 

352.  Appropriations  op  Income  for  Construction,  Equip- 

ment, and  Betterments 54 

353.  Miscellaneous  Appropriations  of  Income 55 

Income  Balance  Transferred  to  Credit  (or  Debit) 

of  Corporate  Surplus  or  Deficit  Account. 


47 

INSTRUCTIONS  PERTAINING  TO  INCOME  STATEMENT. 

15.  Income  account  defined. — The  Income  Account  brings  together 
those  accounts  that  show  the  total  amtnint  of  money  that  the  company 
has  received  or  become  enlitled  Id  receive  for  services  rendered  during 
a  given  period,  the  return  accruing  upon  investments  during  tlie  period 
and  the  disbursements  and  obligations  (fixed  charges)  incurred  that 
affect  the  disposition  of  the  amounts  so  received  or  accrued. 

The  sura  total  of  the  credit  l)alances  in  the  operating  revenue  acccmnts 
at  tlio  close  of  a  fiscal  period  duniiiii^hed  by  the  ojMjrating  expenses, 
the  taxes,  and  the  uncollectible  bills  assignable  to  such  operation  gives 
the  operating  income  (or  loss)  for  the  period. 

To  the  net  revenue  (or  deficit)  are  added  the  nonoperating  revenues, 
less  the  nonoperating  revenue  deductions,  which  gives  the  gross  income 
for  the  period. 

From  the  gross  income  are  deducted  various  compulsory  deductions 
grouped  herein  as  "Deductions  from  Gross  Income;"  tliis  gives  the 
Net  Income  (or  Loss)  fi>r  the  particular  period.  From  the  Net  Income 
are  deducted  such  appropriations  as  are  made  from  Income ;  this  gives 
the  amount  that  should  be  carried  to  the  Corporate  Surplus  or  Deficit 
account. 

Hi.  Taxes. — Separate  accounts  should  be  kept  of  the  taxes  applicable 
to  operating  and  to  nonoperating  revenues,  and,  if  the  company  engages 
in  business  other  than  telephone  operations,  taxes  applicable  to  such 
other  business  should  also  be  kept  separate. 

The  tax  accounts  should  be  charged  each  month  and  an  open 
account  termed  "Tax  Liability  Account"  should  be  concurrently 
credited  with  the  month's  proportion  of  taxes  applicable  to  the 
operations  covered  by  each  account.  If  the  exact  amounts  of  the 
annual  taxes  are  not  known,  they  should  be  estimated  and  one-twelfth 
of  the  estimated  amounts  be  charged  each  month.  From  time  to 
time  during  the  j'ear,  as  the  actual  tax  levies  become  known,  the 
monthly  charges  should  be  adjusted  so  as  to  include  as  nearly  as 
may  be  possible  the  total  amount  of  the  taxes  in  the  period  to  wliich 
they  apply.  When  any  such  tax  bill  is  actually  paid,  the  "Tax  Lia- 
bility Account"  .sliould  be  del)ited  with  the  amount  of  the  payment. 
If  the  balance  in  the  "Tax  Liability  Account"  is  a  debit  balance,  due 
to  the  prepayment  of  taxes  applicable  to  a  period  subsequent  to  that 
for  wliich  the  Income  Account  is  stated,  the  amount  of  the  debit  balance 
should  be  shown  in  account  No.  130,  "Prepaid  Taxes";  and  if  the  bal- 
ance is  a  credit  bahince  the  amount  should  be  shown  in  account  No. 
166,  "Taxes  Accrued." 

Taxes  on  property  leased  shoidd  be  charged  to  the  appropriate  tax 
account  by  the  party  wliich,  under  the  terms  of  the  lease  contract, 
is  obligated  for  such  taxes.  If  the  other  party  to  the  lea^e,  as  a  mat- 
ter of  convenience,  pays  the  taxes  to  the  government  authorities, 
such  taxes  i^hould  not  enter  it.s  tax  accounts  but  should  be  charged 
directly  to  the  party  obligated  for  the  taxes. 

The  tax  accounts  must  not  include  any  fees  or  charges  sometimes 
called  taxes,  such  as  water  taxes,  drainage  taxes,  fire  taxes,  etc.,  wliich 
are  payments  for  s<-)me  specified  service  rendered  by  the  government. 


48 

TEXT  EXPLANATORY  OF  ACCOUNTS  APPEARING  IN  THE 

INCOME  STATEMENT. 

I.  OPEKATING  INCOME. 

300.  Telephone  Operating  Revenues. 

This  a(*ount  should  include  the  total  operating  revenues  de- 
rived from  the  telephone  operations  of  the  company  for  the  period 
covered  by  the  income  account  statement.  (For  the  primary 
operating  revenue  accounts,  see  pp.  61  to  63.) 

301.  Telephone  Operating  Expenses. 

This  account  should  include  the  total  operating  expenses  of  the 
telephone  operations  of  the  company  for  the  period  covered  by 
the  income  account  statement.  (For  the  primary  operating 
expense  accounts,  see  pp.  69  to  77.) 

302.  Other  Operating  Revenues. 

This  account  should  include  the  total  revenues  of  the  company 
derived  from  operations,  other  than  telephone  operations,  for  the 
period  covered  by  the  income  account  statement.  This  account 
includes  the  revenue  derived  from  the  operation  of  property 
carried  in  balance-sheet  account  No.  Ill,  "Miscellaneous  Invest- 
ments," when  such  property  is  operated  by  the  accounting 
company. 

303.  Other  Operating  Expenses. 

This  account  should  include  the  total  expenses  of  operations 
other  than  telephone  operations  for  the  period  covered  by  the 
income  account  statement.  This  account  includes  the  expenses 
of  the  operation  of  property  carried  in  balance-sheet  account 
No.  Ill,  "Miscellaneous  Investments,"  when  such  property  is 
operated  by  the  accounting  company. 

304.  Uncollectible  Operating  Revenues. 

This  account  should  include  the  amount  of  any  account  for 
telephone  and  other  services  which,  after  a  reasonably  diligent 
effort  to  collect,  has  proved  impracticable  of  collection.  This 
account  inclucfes  only  uncollectible  bills  for  amounts  which  have 
been  treated  as  operating  revenues;  other  uncollectible  bills 
should  be  charged  to  account  No.  323,  "Uncollectible  Nonoperat- 
ing  Revenues,"  or  to  Corporate  Surplus  or  Deficit  account,  as 
may  be  appropriate. 

This  account  may  include  monthly  charges,  based  upon  esti- 
mates, to  create  a  reserve  for  uncollectible  bills,  provided  such 
reserve  is  adjusted  annually  in  accordance  with  the  experience 
of  the  accounting  company.  Such  amounts  should  be  credited 
to  a  subaccount  under  account  No.  118,  "Due  from  Subscribers 
and  Agents,"  to  which  should  be  charged  bills  that  have  proved 
impracticable  of  collection. 


49 

305.  Taxes  Assignable  to  Operations. 

This  account  should  inchide  Federal,  State,  county,  mu- 
nicipal, and  other  taxinj^-district  taxes  relating  to  telephone 
property,  operations,  and  prix'ileges  for  the  period  for  which  the 
Income  Account  is  stated .  This  account  should  also  include  the 
taxes  on  other  property  and  operations,  the  revenues  and  expenses 
of  which  are  included  in  accounts  302  and  303,  respectively. 
(See  sec.  16,  p.  47.) 

II.  NONOPEKATING  EEVENUES. 

310.  Rent  Revenues  from  Lease  of  Telephone  Plant. 

This  account  should  include  all  revenues  from  the  company's 
interests  in  telephone  plant  or  equipment  held  by  others  under 
some  form  of  lease  whereby  it  surrenders  possession  of  such 
property  for  operating  purposes. 

This  account  is  intended  to  cover  only  rents  receivable  for  the 
use  of  telephone  exchanges  or  operating  units  held  as  a  whole 
by  others  under  some  form  of  lease. 

311.  Miscellaneous  Rent  Revenues. 

This  account  should  include  the  revenues  accruing  to  the 
company  as  a  return  upon  rented  property  other  than  telephone 
plant  and  equipment,  held  by  others  under  lease,  as  pro\'ided 
for  in  the  preceding  account. 

Note.— If  the  property  rented  is  so  intimately  connected  with  property 
used  in  the  company's  telephone  operations  that  the  expenses  on  the  former 
can  not  be  ascertained,  the  revenues  should  be  credited  to  account  No.  505, 
"Minor  Rents  of  Exchange  Plant,"  No.  515,  "Minor  Rents  of  Toll  Plant,"  or 
No.  524,  "Rents  from  Other  Operating  Property,"  as  may  be  appropriate, 
and  the  expenses  in  coimection  with  the  rented  property  should  be  included 
in  the  operating  expenses. 

312.  Dividend  Revenues. 

This  account  should  include  dividends  declared  on  stocks 
owned  by  the  accounting  company  (and  held  in  its  treasury  or 
deposited  in  trust),  or  controlled  through  lease  or  otherwise,  the 
income  from  which  is  the  property  of  the  accotinting  company. 
Accruals  of  guaranteed  dividends  may  be  included  in  this 
account  if  their  payment  is  reasonably  assured. 

Note  A.— This  accotmt  should  not  include  credits  for  dividends  on  stocks 
issued  or  assumed  by  the  accounting  company  and  owned  by  it,  whether  held 
in  its  treasury,  in  sp>ecial  deposits,  or  in  sinking  or  other  reserve  funds,  or 
pledged  as  collateral. 

Note  B. — Dividends  on  stocks  of  other  companies  held  in  sinkinL,  or  othei 
reserve  ftmds  should  not  be  included  in  this  accoimt,  but  should  be  credited 
to  accoimt  No.  314,  "Sinking  and  Other  Reserve  Fund  Accretions." 

313.  Interest  Revenues. 

This  account  should  include  interest  on  funded  securities  of 
other  companies  owned  by  the  accounting  company  (and  held 


50 

in  its  treasury  or  deposited  in  trust),  or  controlled  through  lease 
or  otherwise,  the  income  from  which  is  the  property  of  the 
accounting  company;  interest  on  notes,  bank  balances,  and 
open  accounts;  and  other  analogous  items  including  discount 
on  short-term  notes.  Interest  accrued  should  not  be  credited 
unless  its  payment  is  reasonably  assured  by  past  experience, 
guaranty,  anticipated  provision  or  otherwise.  In  other  cases 
the  credit  to  this  account  should  be  based  upon  the  interest 
actually  collected. 

Note  A.— This  account  should  not  include  interest  on  fimded  securities 
issued  or  assumed  by  the  accounting  company  and  o\vned  by  it,  whether  held 
in  its  treasury,  in  special  deposits,  or  in  sinking  or  other  reserve  funds,  or 
pledged  as  collateral. 

Note  B.— Interest  on  funded  securities  of  other  companies  held  ia  sinking 
or  other  reserve  funds  should  not  be  included  in  this  account,  but  in  account 
No.  314,  "Sinking  and  Other  Reserve  Fund  Accretions." 

Note  C— At  the  option  of  the  company  there  may  be  included  in  this 
account  the  portion  applicable  to  the  fiscal  period  of  the  amount  requisite  to 
extinguish  (during  the  interval  between  the  date  of  acquisition  and  the  date 
of  matiirity)  the  discount  or  premium  on  fimded  securities  of  other  companies 
owned. 

314.  Sinking  and  Other  Reserve  Fund  Accretions. 

This  account  should  include  the  revenues  accruing  on  cash, 
securities,  and  other  assets  (other  than  securities  issued  or  assumed 
by  the  accounting  company)  in  the  hands  of  the  trustees  or 
specifically  set  aside  for  sinking  and  other  special  funds. 

Note  A.— At  the  option  of  the  company  there  may  be  included  in  this 
account  the  portion  applicable  to  the  fiscal  period  of  the  amount  requisite  to 
extinguish  (during  the  interval  between  the  date  of  acquisition  and  the  date 
of  maturity)  the  discount  or  premium  on  funded  securities  of  other  companies 
held  in  sinking  or  other  reserve  fimds. 

Note  B. — If  the  income  on  any  special  fund  is  retained  in  the  fund 
and  if  the  fund  is  required  to  be  represented  by  a  reserve,  the  amounts 
credited  to  this  account  in  respect  to  such  income  should  be  concurrently 
charged  to  account  No.  350,  "Appropriations  of  Income  to  Sinking  and  Other 
Reserve  Funds,"  and  credited  to  account  No.  172,  "Surplus  Invested  in 
Sinking  Funds,"  or  other  appropriate  reserve  account. 

315.  Profits  from  Operations  of  Others. 

WTienever  in  accordance  with  the  terms  of  any  contract  the 
company  is  entitled  to  participate  in  the  profits  from  operations 
of  others,  all  revenues  accruing  to  the  company  from  such  ssource 
should  be  credited  to  this  account. 

Note. — This  account  does  not  include  any  dividends  or  other  returns  upon 
securities  issued  by  such  separately  operating  companies,  nor  any  remunera- 
tion for  services  or  the  use  of  property  as  provided  for  in  account  No.  526, 
"Licensee  Revenue— Cr." 

316.  Miscellaneous  Nonoperating  Revenues. 

This  account  should  include  all  nonopei-atiug  revenues  not 
provided  for  in  the  foregoing  accounts. 


51 

III.  NONOPERATING  EEVENUE  DEDUCTIONS. 

320.  Rent  Expen.se. 

Thi.s  arrount  should  inrludo  all  expen-ses  in  ronnec-tion  with 
rented  property,  the  rents  of  which  are  included  in  account 
No.  310  or  No.  311,  such  as  the  cost  of  maintenance  when  borne 
by  the  company,  the  cost  of  negotiating  contracts,  advertising 
for  tenants,  fees  paid  conveyancers,  collector's  commissions, 
cost  of  enforcing  payment  of  rent,  cost  of  ousting  tenants,  etc. 
This  includes  the  expense  accruing  while  the  property  is  idle 
and  awaiting  an  occupant.     It  does  not  include  taxes. 

Note.— If  the  property  rented  is  so  intimately  connected  with  property 
used  in  the  company'.s  telephone  operations  that  the  expenses  on  the  former 
can  not  be  ascertained,  they  should  be  included  in  the  operating  expenses  and 
the  revenue  should  be  credited  to  account  No.  505,  "Minor  Rents  of  Exchange 
Plant,"  No.  515,  "Minor  Rents  of  Toll  Plant,"  or  No.  524,  "Rents  from 
Other  Operating  Property,"  as  may  be  appropriate.  ■ 

381.   MiSCELLAXEOVS    NOXOPERATING    EXPENSE. 

Tills  account  should  include  all  expenses  in  connection  with 
nonoperating  revenue  other  than  the  expense  provided  for  in 
account  No.  320,  "Rent  Expense."  This  account  should 
*  include  all  expenses  in  connection  with  procuring  interest 
revenue,  dividend  revenue,  profits  from  operations  of  others, 
and  analogous  items.  It  does  not  include  the  taxes  on  such 
investments. 

322.  Nonoperating  Taxes. 

This  account  should  include  all  taxes  payable  by  the  com- 
pany accrued  upon  nonoperating  property  and  all  taxes  assign- 
able to  nonoperating  revenues.     (See  sec.  16,  p.  47.) 

323.  Uncollectible  Nonoperating  Revenues. 

When  any  nonoperating  revenues  are  judged  by  the  company 
to  be  uncollectible,  the  amount  thereof  should  be  credited  to 
the  account  in  which  theretofore  charged  and  charged  to  this 
account. 

IV.  DEDUCTIONS  FEOM  GEOSS  INCOME. 

330.  Rent  Deductions  for  Lease  of  Telephone  Plant. 

This  account  should  include  all  amounts  accrued  against 
the  company  for  rent  of  telephone  plant  and  equipment  which 
it  holds  under  some  form  of  lease  from  another,  and  of  wliich 
for  operating  purposes  it  has  the  exclusive  possession. 

This  account  is  intended  to  cover  only  rents  payable  for  the 
use  of  telephone  exi^hanges  or  operating  units  held  as  a  whole 
under  some  form  of  lease. 

331.  Rent  Deductions  for  Telephone  Offices. 

This  account  should  include  the  rents  payable  accruing  for 
use  of  general  oftices  and  central  and  branch  telephone  offices 


52 

owned  by  others,  excepting  rents  for  which  provisions  are  here- 
inafter made  under  "Clearing  accounts."     (See  p.  77.) 

Note. — "Where  rent  payments  cover  services,  light,  heat,  etc.,  and  mainte- 
nance, in  addition  to  a  return  upon  investment,  an  apportionment  should  be 
made  of  the  rent  payment  and  the  amount  representing  interest  and  main- 
tenance (estimated,  if  not  known)  should  be  charged  to  this  account,  the 
balance  of  the  payment  being  charged  to  the  appropriate  expense  accounts. 
Where  repairs  of  rented  buildings  are  made  by  the  company,  the  cost  of  such 
repairs  should  be  charged  to  the  appropriate  operating  expense  or  other 
accounts. 

332.  Rent  Deductions  for  Condl'its,  Poles,  and  Other  Supports. 

This  account  should  include  the  rents  payable  accruing  for  the 
use  of  ducts,  conduits,  or  subways  owned  by  others  and  rents  for 
the  use  of  poles,  fences,  or  buildings  as  supports  for  the 
telephone  lines  of  the  accounting  company. 

333.  Rent  Deductions  for  Instruments  and  Equipment. 

This  account  should  include  the  rents  payable  accruing  for 
telephone  instruments  and  equipment  owned  by  others. 

This  account  does  not  include  amounts  paid  licensor  telephone 
companies  under  an  agreement  to  pay  a  certain  percentage  of 
revenues  for  use  of  instruments,  privilege  of  connection,  etc. 

334.  Miscellaneous  Rent  Deductions. 

This  account  should  include  rents  payable  accrued  not  pro- 
vided for  elsewhere. 

Note. — Rent  of  tools,  equipment,  or  other  facilities  used  for  construction 
should  not  be  included  in  this  account,  but  in  the  appropriate  fixed  capital 
account. 

335.  Interest  Deductions  for  Funded  Debt. 

This  account  should  include  all  interest  accrued  on  out- 
standing funded  debt  and  debenture  stock  issued  or  assumed 
by  the  company.  This  account  does  not  include  interest  on 
securities  held  by  the  company  in  its  treasury,  in  sinking  or 
other  reserve  funds,  or  pledged  as  collateral. 

Note  A. — Interest  accruing  on  funded  securities  after  maturity  should  not 
be  included  in  this  account,  but  in  account  No.  336,  "Other  Interest  Deduc- 
tions." 

Note  B  . — If  any  of  the  funded  debt  securities  issued  or  assumed  by  the 
company  are  held  in  its  sinking  or  other  resene  funds  and  the  interest  on 
such  funded  debt  is  an  accretion  to  the  fund,  the  interest  on  such  securities 
should  not  be  charged  to  this  account,  but  an  amount  equal  to  the  interest  on 
the  funded  debt  so  held  should  be  charged  to  account  No.  350,  "Appropria- 
tions of  Income  to  Sinking  and  Other  Reserve  Funds."  This  does  not  apply 
to  securities  carried  in  account  No.  127,  "Provident  Fund  .\ssets." 

336.  Other  Intere.st  Deductions. 

This  account  should  include  all  interest  accrued  on  unfunded 
debt,  such  as  short-term  notes  payable  on  demand  or  having 
dates  of  maturity  one  year  or  less  from  date  of  issue,  and  open 
accounts  and  other  analogous  items,  including  discount  on  short- 
term  notes;  also  interest  accruing  on  funded  debt  securities 
after  maturity  of  debt. 


53 

337.  Loss  ON  Operations  of  Otheks. 

\\'henever,  in  accordance  with  the  terms  of  any  contract,  the 
company  is  bound  to  contribute  toward  reimbursement  of  the 
losses  resulting  from  the  operations  of  others,  all  liabilities  against 
the  company  accruing  from  such  source  should  be  charged  to 
this  account. 

338.  Amortizatio.n  of  Debt  Discount  and  Expense. 

Charge  to  this  account  during  each  fi.scal  period  the  propor- 
tion of  the  unamortized  discount  and  expense  on  outstanding 
funded  debt  which  is  applicable  to  the  period.  (See  sec.  7, 
p.  14.) 

339.  Release  of  Premiums  on  Debt — Cr. 

Credit  to  this  account  during  each  fiscal  period  the  propor- 
tion of  the  premium  at  which  outstanding  funded  debt  waa 
issued  which  is  applicable  to  the  period.     (See  sec'.  7,  p.  14.) 

340.  Amortization  of  Landed  Capital. 

Charge  to  this  account  during  each  fiscal  period  such  portion 
of  the  original  money  cost  (estimated,  if  not  known)  of  landed 
capital  as  carried  in  account  No.  207,  "Right  of  Way,"  and 
No.  211,  "Land,  "  as  is  necessary  to  cover  the  proportion  of  life 
thereof  expired  during  such  period. 

Note  A.— The  amounts  charged  to  this  account  should  be  concurrently 
credited  to  account  No.  103, "  Reserve  for  Amortization  of  Intangible  Capital— 
Cr." 

Note  B. — When  any  landed  capital  expires  or  is  otherwise  retired 
from  ser%ice  (as  e.  g.,  through  sale)  the  fixed  capital  arcount  or  invest- 
ment account,  if  any,  originally  charged  therewith  should  be  credited 
with  the  amount  originally  charged,  account  No.  10.3,  "Reserve  for  Amor- 
tization of  Intangible  Capital — Cr.,"  should  be  debited  with  all  amounts 
theretofore  credited  to  such  account  in  respect  of  such  capital  so  going  out  of 
service;  the  appropriate  account  should  be  debited  with  the  proceeds  of  sale, 
if  any,  and  any  necessary  adjustment  should  be  made  through  the  Corporate 
Surplus  or  Deficit  accoimt. 

341.  Miscellaneous  Deductions  from  Income. 

This  account  should  include  all  deductions  from  gross  income 
which  are  in  the  nature  of  fixed  charges  but  not  otherwise  pro- 
vided for,  such  as  those  required  by  the  terms  of  some  contract, 
agreement,  charter  provL*<ion,  law,  or  ordinance.  Such  deductions 
should  not  include  any  appropriations  or  dispositions  of  income 
that  rest  solely  in  the  discretion  of  the  accounting  company. 

V.  DISPOSITION  or  NET  INCOME. 

350.  Appropriations  of  Income  to  Sinking  and  Other  Reserve 

Funds. 

This  account  should  include  amounts  of  appropriations  of 

income  for  sinking  and   other  reserve  funds.     The  terms  of 

mortgages,  deeds  of  trust,  or  other  contracts  providing  for  the 

allocation  of  income  or  for  the  payment  of  definite  sums  into 


54 

sinking  and  other  reserve  funds,  and  for  accretions  to  such 
funds  on  account  of  income  from  preAious  investments,  may  be 
made  the  basis  of  such  appropriations. 

The  appropriations  for  payments  or  accretions  to  the  funds 
may  include  amounts  equal  to  (1)  direct  payments;  (2)  the 
interest  or  di\ddends  on  securities  issued  or  assumed  by  the 
accounting  company  and  held  in  such  funds;  (3)  the  income 
from  investments  in  securities  (other  than  those  issued  or 
assumed  by  the  accounting  company)  held  in  such  funds;  and 
(4)  the  income  from  cash  and  other  property  held  in  such  funds. 

Note  A. — The  amounts  charged  to  this  account  should  be  concurrently 
credited  to  account  No.  172,  "Surplus  Invested  in  Sinking  Funds,"  or  other 
appropriate  reserve. 

Note  B. — If  appropriations  for  direct  payments  are  made  from  surplus, 
they  should  be  charged  to  account  No.  411,  "Appropriations  of  Surplus  to 
Sinking  and  Other  Reserve  Funds. " 

351.  Dividend  Appropriations  op  Income. 

This  account  should  include  dividends  on  outstanding  capital 
stock  issued  or  assumed  by  the  accounting  company  (other  than 
that  held  by  it),  if  declared  from  income. 

This  account  should  be  subdivided  so  as  to  show  separately 
the  dividends  on  the  various  classes  of  capital  stock. 

If  a  dividend  is  payable  in  any  thing  other  than  money,  such 
thing  should  be  described  in  the  entry  with  sufficient  particu- 
larity to  identify  it. 

Note  A. — This  account  should  include  the  dividends  declared  out  of 
income  on  all  classes  of  capital  stock,  except  debenture  stock.  The  payments 
on  debenture  stock  should  be  charged  to  account  No.  335,  "Interest  Deduc- 
tions for  Funded  Debt. " 

Note  B.— This  account  should  not  include  charges  for  dividends  on  capital 
stock  issued  or  assumed  by  the  accoimting  company  and  owned  by  it,  whether 
held  in  its  treasury,  in  special  deposits,  or  in  sinking  or  other  reserve  funds, 
or  pledged  as  collateral.  (See  account  No.  .350,  "Appropriations  of  Income 
to  Sinking  and  Other  Reserve  Funds. ") 

Note  C— This  account  should  be  used  if  the  appropriations  are  definitely 
made  as  chargeable  to  income.  If  similar  appropriations  are  made  from 
surplus,  they  should  be  charged  to  account  No.  412,  "Dividend  Appropria- 
tions of  Surplus. " 

352.  Appropriations   of  Income   for   Construction,   Equipment, 

AND  Betterments. 

This  account  should  include  amounts  appropriated  from 
income  for  construction  and  equipment  and  for  betterments  of 
property  carried  in  fixed  capital  accounts. 

These  amounts  should  be  subdivided  so  as  to  show — (a)  amounts 
expended  during  preceding  fiscal  periods,  (h)  amounts  expended 
during  the  current  fiscal  period,  and  (c)  amounts  held  in  reserve. 

Note.— This  account  should  be  used  if  the  appropriations  are  definitely 
made  as  chargeable  to  income.  If  similar  appropriations  are  made  from 
surplus,  they  should  be  charged  to  account  No.  415,  "Appropriations  of  Sur- 
plus for  Construction,  Equipment,  and  Betterments." 


55 

353.  Miscellaneous  AppitoruiATios's  of  Income. 

This  account  should  include  appropriations  of  income  not 
provided  for  elsewhere. 

Note.— This  account  should  bo  used  if  the  appropriations  are  definiu-ly 
made  as  chargeable  to  income.  If  similar  appropriations  are  made  from 
surplus,  they  should  be  charged  to  account  No.  416,  "Miscellaneous  Appro- 
priations of  Surplus. " 


56 

CORPORATE  SURPLUS  OR  DEFICIT  ACCOUNT. 

I.  OEEDITS. 

Balance  (at  beginning  of  fiscal  period).  Page. 

400.  Credit  Balance  Transferred  FROM  Income  Account..  .  57 

401.  mlscell.^neous  additions  to  surplus 57 

Balance  Debit  (.\t  end  op  fiscal  period)  Carried  to 

Balance  Sheet. 

II.  DEBITS. 

Balance  (at  beginning  of  fiscal  period). 

410.  Debit  Balance  Transferred  From  Income  Account..  .         57 

411.  Appropriations    of    Surplus    to    Sinking    and    Other 

Reserve  Funds 57 

412.  Dividend  Appropriations  of  Surplus 58 

413.  Realized  Depreciation  not  Covered  by  Reserves...  58 

414.  Amortiz.\tion  Unprovided  for  Elsewhere 58 

415.  Appropriations  of  Surplus  for  Construction,  Equip- 

ment, AND  Bettermen'js 58 

416.  Miscellaneous  Appropri-'^tions  of  Surplus 59 

417.  Other  Deductions  from  Surplus 59 

Balance  Credit  (at  end  op  fiscal  period)  Carried  to 

Balance  Sheet. 

INSTRUCTIONS    PERTAINING    TO    CORPORATE    SURPLUS 
OR  DEFICIT  ACCOUNT. 

17.  Corporate  surplus  or  deficit  account  defined. — This  account  or 
summary  is  th*e  connecting  link  between  the  Income  Account  and  the 
Balance  Sheet.  It  summarizes  the  changes  in  the  corporate  surplus 
or  deficit  during  a  given  fiscal  period  resulting  from  the  operations  and 
the  business  transactions  during  that  period,  as  well  as  those  effected  by 
any  disposition  of  net  profits  made  solely  at  the  option  of  the  company 
by  accounting  adjustments  not  properly  attributable  to  the  period,  or 
by  miscellaneous  losses  or  gains  not  provided  for  elsewhere.  The  cor- 
porate surplus  or  deficit  should  be  shown  on  the  balance-sheet  state- 
ment under  account  No.  137,  "Corporate  Deficit,"  or  No.  174,  "Corpo- 
rate Surplus  Unappropriated." 


57 

TEXT     EXPLANATORY     OF     CORPORATE     SURPLUS     OR 

DEFICIT   ACCOUNT. 

I.  CREDITS. 

400.  Credit  B.\l.\nce  Tkaxskeukku  from  Income  Account. 

Under  tliis  title  should  be  shown  the  amount  of  net  income 
brought  forward  from  the  Income  Account. 

401.  Miscellaneous  Additions  to  Surplus. 

This  account  sliould  include  amounts  (not  pro\'ided  for  else- 
where) transferred  to  Surplus  from  other  accounts  and  amounts 
representing  increases  in  resources  not  properly  assignable  to 
the  income  of  the  fiscal  period  for  which  the  accounts  are  stated. 
Among  the  items  which  should  be  credited  to  this  account  are, 
for  e.xainple — 

Adjustment  or  cancellation  of  old  balance-sheet  accounts 
(other  than  fixed  capital). 

P*rofits  derived  from  the  sale  of  property  carried  in  account 
No.  Ill,  "Miscellaneous  Investments." 

'Credits  resulting  from  adjustments  required  to  bring  to  par 
securities  issued  or  assumed  by  the  accounting  company  and 
reacquired  at  a  cost  less  than  the  par  value. 

Premium  on  capital  stock  at  the  time  of  its  retirement. 

Unextinguished  premiums  on  funded  debt  retired  before 
maturity. 

II.  DEBITS. 

410.  Debit  Balance  Transferred  from  Income  Account. 

Under  tliis  title  should  bo  shown  the  amount  of  net  loss 
brought  forward  from  the  Income  Account. 

411.  Appropriations  of  Surplus  to  Sinking  and  Other  Reserve 

Funds. 
This  account  should  include  amounts  of  appropriations  of 
surplus  for  sinking  and  other  reserve  funds.  The  terms  of 
mortgages,  deeds  of  trust,  or  other  contracts  pro\'iding  for  the 
allocation  of  suqilus  or  for  the  payment  of  definite  amounts 
into  sinking  and  other  reserve  funds  may  be  made  the  basis  of 
such  appropriations. 

Note  A. — This  account  should  be  used  if  the  appropriations  are  definitely 
made  as  chargeable  to  surplus.  If  similar  appropriations  are  made  from 
income,  they  should  be  charged  to  account  No.  350,  ".\ppropriations  of  Income 
to  Sinking  and  Other  Reserve  Funds." 

Note  B.— If  appropriations  are  made  to  cover  the  income  accruing  on 
sinking-fund  assets  and  to  cover  amounts  equivalent  to  interest  on  securities 
issued  or  assumed  bj'  the  accounting  company  and  held  in  such  funds,  the 
amounts  of  such  appropriations  should  not  be  included  in  this  account,  but 
should  be  included  in  account  No.  350,  "Appropriations  of  Income  to  Sinking 
and  Other  ReservfvFunds."  If  appropriations  are  made  to  cover  sums 
equivalent  to  dividends  on  stock  issued  or  assumed  by  the  accounting  com- 
pany and  held  in  such  funds  the  amounts  of  such  appropriations  may  be 
Included  in  this  account  or  in  account  No.  350,  according  as  the  dividend  is 
declared  from  surplus  or  from  income. 


58 

Note  C— The  amounts  charged  to  this  account  should  be  concurrently 
credited  to  balance-sheet  account  No.  172,  "Surplus  Invested  in  Sinking 
Funds,"  or  other  appropriate  reserve  accounts. 

412.  Dividend  Appropriations  of  Surplus. 

This  accoimt  should  include  dividends  on  outstanding  capi- 
tal stock  issued  or  assumed  by  the  accounting  company  (other 
than  that  held  by  it),  if  declared  from  surplus. 

This  accoimt  should  be  subdi\-id8d  so  as  to  show  separately 
the  di\ddends  on  the  various  classes  of  capital  stock. 

If  a  diAddend  is  payable  in  any  thing  other  than  money, 
such  thing  should  be  described  in  the  entry  with  sufficient 
particularity  to  identifj'  it. 

Note  A. — This  account  includes  the  dividends  declared  from  surplus 
on  all  classes  of  capital  stock  except  debenture  stock.  The  payments  on 
debenture  stock  should  be  charged  to  account  No.  335,  "Interest  Deductions 
for  Funded  Debt." 

Note  B. — This  account  should  not  include  charges  for  dividends  on  capital 
stock  issued  or  assumed  by  the  accounting  company  and  owned  by  it,  whether 
held  in  its  treasury,  in»speeial  deposits,  or  sinking  or  other  reserve  funds,  or 
pledged  as  collateral.  (See  account  No.  411,  "Appropriations  of  Surplus  to 
Sinking  and  Other  Reserve  Funds.") 

Note. — This  account  should  be  used  if  appropriations  are  definitely  made 
as  chargeable  to  surplus.  If  similar  appropriations  are  made  from  income, 
they  should  be  charged  to  account  No.  351,  "Dividend  Appropriations  of 
Income." 

413.  Realized  Depreciation  not  Covered  by  Reserves. 

Charge  to  this  account  the  realized  depreciation  (i.  e.,  the 
difference  between  the  original  cost  and  the  salvage,  if  any)  on 
tangible  fixed  capital  retired,  if  such  depreciation  has  not  been 
provided  for  through  a  depreciation  reserve.  This  includes  such 
portion  of  the  realized  depreciation  on  any  physical  property 
which  was  installed  prior  to  the  period  for  which  the  reserve 
was  established  as  is  due  to  life  in  service  before  that  period. 
This  portion  may  be  estimated  on  the  basis  of  the  proportion 
which  the  life  in  service  of  the  property  in  question  prior  to 
the  period  for  which  the  reserve  was  established  bears  to  its 
entire  life  in  service.     (See  sec.  23,  p.  67.) 

414.  Amortization  Unprovided  for  Elsewhere. 

Charge  to  this  account,  when  any  intangible  property  expires 
or  is  relinquished,  such  portion  of  its  cost  as  has  not  been  pre- 
viously vvTitten  off  or  is  not  covered  by  account  No.  103,  "Reserve 
for  Amortization  of  Intangible  Capital — Cr."  Charge  also  to 
this  account  all  optional  amortization,  such  as  that  of  assets  car- 
ried in  accounts  No.  201,  "Organization"  and  No.  204,  "Other 
Intangible  Capital." 

415.  Appropriations  of  Surplus  for  Construction,  Equipment, 

and  Betterments. 

This  account  should  include  amounts  appropriated  from 
surplus  for  construction  and  equipment  and  for  betterments 
of  property  carried  in  the  fixed  capital  accounts. 


59 

These  amounts  should  be  subdivided  so  as  to  show  (a)  amounts 
expended  during  preceding  fiscal  periods,  (b)  amounts  expended 
during  the  current  fiscal  period,  and  (c)  amounts  held  in  reserve. 

Note. — This  account  shouki  1)C  iLscd  if  appropriations  arc  dcfinilrly  madoas 
chargeable  to  siirplu.s.  If  similar  appropriations  are  ma<le  from  income,  they 
should  be  charged  to  account  No.  352,  "Appropriations  of  Income  for  Construc- 
tion. Equipment,  and  Betterments." 

416.  MiSCKLLAXEOUS    Al'l'KOI'RIATIOX.S    OF    SURPLUS. 

This  account  should  include  appropriations  of  surplus  not 

provided  for  elsewhere. 

Note. — This  account  should  1)0  used  when  the  appropriations  are  definitely 
made  as  chargeable  to  surplus.  If  similar  appropriations  are  made  from 
income,  they  should  be  charged  to  account  No.  3.53,  "  Miscellaneous  Appropria. 
tions  of  Income." 

417.  Othkr  Deductions  from  Surplus. 

Thif!  account  should  include  amounts  (not  provided  for  else- 
where) transferred  from  Surplus  to  other  accounts,  amounts 
written  off  in  consequence  of  adjustments,  and  payments  not 
properly  chargeable  to  Income  for  the  fiscal  period  for  which 
the  accounts  are  stated.  Among  the  items  which  shotild  be 
charged  to  this  account  are,  ior  example: 

Adjustment  or  cancellation  of  old  balance-sheet  accounts 
(other  than  fixed  capital). 

Losses  resulting  from  the  sale,  destruction,  or  retirement  of 
property  carried  in  account  No.  Ill,  "Miscellaneous  Invest- 
ments." 

Losses  resulting  from  adjustments  required  to  bring  to  par 
securities  issued  or  assumed  by  the  accounting  company  and 
reacquired  at  a  cost  exceeding  the  par  value. 

Deductions  made  to  extinguish  discount  on  capital  stock. 

Deductions  made  to  amortize  debt  discount  and  expense  when 

not  properly  chargeable  to  income. 

Note. — A  complete  analysis  of  this  account  will  be  required  in  annual 
reports  of  the  company  to  the  Commission. 


60 

OPERATING   REVENUE   ACCOUNTS. 
I.  EXCHANGE  SEEVIOE  REVENUES. 

Page. 

500.  Subscribers'  Station  Revenues 61 

501 .  Public  Pay  Station  Revenues 61 

502.  Miscellaneous  Exchange  Service  Revenues 61 

503.  Service  Stations 61 

504.  Private  Exchange  Lines 61 

505.  Minor  Rents  of  Exchange  Plant 61 

506.  Other  Exchange  Revenues 61 

II.  TOLL  SERVICE  REVENUES. 

510.  Message  Tolls 62 

511.  Miscellaneous  Toll  Line  Revenues 62 

512.  Leased  Toll  Lines 62 

513.  Telegraph  Tolls 62 

514.  Telegraph  Service  on  Toll  Lines 62 

515.  Minor  Rents  of  Toll  Plant 62 

516.  Other  Toll  Line  Revenues 62 

III.  MISCELLANEOUS  OPERATING  REVENUES. 

520.  Messenger  Service 63 

521.  Telegraph  Commissions 63 

522.  Other  Telegraph  Service  Charges 63 

523.  Advertising  and  Directory 63 

524.  Rents  from  Other  Operating  Property : 63 

525.  Other  Miscellaneous  Revenue 63 

526.  Licensee  Revenue — Cr 63 

527.  Licensee  Revenue — Dr 63 

INSTRUCTIONS    PERTAINING    TO    OPERATING    REVENUE 

ACCOUNTS. 

18.  Operating  revenues  defined. — By  operating  revenues  are  meant 
all  amounts  of  money  which  the  company  receives  or  becomes  law- 
fully entitled  to  recover  for  services  rendered  and  as  a  return  upon 
property  used  by  the  company  in  its  own  operations.  Credits  to  the 
various  revenue  accounts  should  be  based  upon  the  gross  charges  made 
for  services  rendered  by  the  company. 

19.  Deductions  from  revenues. — Discounts  allowed  subscribers  for 
prompt  payment,  corrections  of  overcharges,  overcoUections  thereto- 
fore credited  and  afterwards  corrected,  authorized  refunds  on  account 
of  failures  in  transmission,  and  other  corrections  should  be  charged  to 
the  revenue  account  to  which  they  relate. 

20.  Commissions. — Commissions  paid  to  attendants  at  pay  stations 
and  to  employees  or  others  in  lieu  of  salaries  should  be  charged  to  appro- 
priate expense  accounts  and  not  to  the  revenue  accounts. 


61 

TEXT  EXPLANATORY  OF  OPERATING  REVENUE  ACCOUNTS. 
I.  EXCHANGE  SERVICE  REVENUES. 

500.  SuBSCRiBKR.s  Station  Revenues. 

This  account  should  inchide  all  revenues  from  subscribers  for 
exchanjjo  service,  extension  stations,  private  branch  exchanges, 
and  other  exchange  service  .stations,  whether  tlie  charge  is  ba.sed 
upon  a  flat  rate  or  measured  rate.  Include  in  this  account,  also, 
charges  made  for  the  insertion  of  extra  names  in  directory  and 
for  use  of  extra  exchange  mileage  in  circuits  to  subscribers'  sta- 
tions, installation  and  cancellation  charges,  and  any  commissions 
on  telegraph  tolls  received  in  lieu  of  rent  for  exchange  lines. 

501.  Public  Pay  Station  Revenues. 

This  account  should  include  all  revenues  from  exchange  service 
at  public  pay  stations.  This  account  should  not  include  revenues 
from  regular  subscribers'  stations  having  measured  service  or  coin 
box  service  at  standard  rates.  The  amount  credited  to  this 
account  should  be  the  gross  amount  collected  or  due  at  tariff  rates; 
commissions  allowed  attendants  or  others  for  pay  station  tolls 
should  be  debited  to  account  No.  648,  "Pay  Station  Commis- 
sions," and  not  to  this  account. 

502.  Miscellaneous  Exchange  Service  Revenues. 

This  account  should  include  all  revenues  derived  from  ex- 
change service  other  than  from  subscribers'  stations  or  public 
pay  stations,  as  provided  for  in  the  following  subaccounts: 

503.  Service  Statioiis. 

This  account  should  include  switching  charges  and  other 
revenues  derived  from  stations,  the  lines  and  equipments  for 
which  are  owned  wholly  or  in  part  by  others,  but  to  which  the 
accounting  company  furnishes  exchange  service. 

504.  Private  Exchange  Lines. 

This  account  should  include  all  revenues  derived  from  tele- 
phone lines,  equipment,  and  instruments  fonning  part  of  the 
company's  exchange  plant  and  leased  to  others  for  use  sls  private 
lines  but  without  exchange  connections  with  other  subscribers. 

505.  Minor  Rents  of  Exchange  Plant.    ' 

This  account  .should  include  all  revenues  derived  from  attach- 
ment.s  to  exc-hange  poles,  the  use  of  exchange  conduits,  and  other 
minor  rents  from  exchange  plant  where  such  property  is  main- 
tained by  the  accounting  company,  and  the  cost  of  such  mainte- 
nance can  not  be  separated  from  the  expense  of  maintaining 
the  rented  property.  This  account  should  not  Include  rents 
for  equipment  leased  to  licensees  under  an  arrangement  for  a 
division  of  revenues  as  provided  for  in  account  No.  526,  "Li- 
censee Revenue — Cr." 

506.  Other  Exchange  Revenues. 

This  account  should  include  all  exchange  service  revenues 
not  provided  for  elsewhere. 


62 

II.  TOLL  SEEVIOE  REVENUES. 

510.  Message  Tolls. 

This  account  should  inchide  all  revenues  derived  from  messages 
transmitted  wholly  over  the  company 's  lines  between  stations  in 
different  exchange  areas  and  for  which  a  charge  is  made  that  is 
not  included  in  contracts  with  subscribers  for  station  service; 
also  the  accounting  company's  proportion  of  tolls  on  messages 
transmitted  by  the  joint  use  of  its  own  and  other  lines. 

511.  Miscellaneous  Toll  Line  Revenues. 

Tills  account  should  include  all  toll  service  revenues  (other 
than  message  tolls),  as  provided  for  in  the  following  subaccounts: 

512.  Leased  Toll  Lines. 

This  accoimt  should  include  all  revenues  derived  from  toll 
lines  (including  the  terminal  exchange  circuits)  leased  by  others 
under  contracts  giving  exclusive  telephone  use  either  con- 
tinuously or  during  stated  periods.  Such  plant  may  be  leased 
in  connection  with  private  branch  exchange  or  private  exchange 
line  installations. 

Note. — Revenues  from  private  branch  exchanges  or  private  lines,  the 
contracts  for  which  provide  for  the  use  of  toll  circuits,  should  be  divided 
(by  estimate,  if  necessary)  between  Exchange  Revenue  and  'Toll  Revenue. 

513.  Telegraph  Tolls. 

This  account  should  include  all  revenues  received  from  tele- 
graph companies  for  the  use  of  toll  lines  for  telephoning  tele- 
grams and  cablegrams. 

514.  Telegraph  Service  on  Toll  Lines. 

This  account  should  include  all  revenues  derived  from  the 
use  of  toll  lines  for  telegraph  circuits  whether  such  lines  are 
■    used  by  telegraph  companies,  brokers,  or  others. 

515.  Minor  Rents  of  Toll  Plant. 

This  account  should  include  all  revenues  derived  from  attach- 
ments to  toll  poles,  the  use  of  toll  conduits,  and  other  minor  rents 
from  toll  plant  where  such  property  is  maintained  by  the  ac- 
counting company,  and  the  cost  of  such  maintenance  can  not 
be  separated  from  expense  of  maintaining  the  rented  property. 
This  account  should  not  include  rents  from  equipment  leased 
to  licensees  under  an  arrangement  for  a  division  of  revenues 
as  provided  for  in  account  No.  526,  "Licensee  Revenue— Cr. " 

516.  Other  Toll  Line  Revenues. 

This  account  should  include  all  toll  line  revenues  not  pro- 
vided for  elsewhere. 


63 

IIL  MISCELLANEOUS  OPERATING  EEVENTJES. 

520.  Messenger  Service. 

Tliis  account  should  include  all  revenues  derived  from  mes- 
senger service. 

521.  Telegraph  Commissions. 

This  account  should  include  all  commissions  receivable  for 
the  collection  of  telegraph  and  cable  tolls  on  messages  trans- 
mitted between  telegraph  offices  and  their  patrons  and  upon 
which  the  accounting  company  undertakes  to  make  collection. 

622.  Other  Telegraph  Service  Charges. 

This  account  should  include  all  revenues  (not  classed  as  tele- 
graph commissions  or  telegraph  tolls)  received  from  telegraph 
companies  for  services  rendered  by  the  telephone  company's 
employees  in  joint  telephone  offices  in  connection  with  telegraph 
and  cable  messages,  such,  for  example,  as  receiving  messages 
from  the  public  and  quoting  rates. 

623.  Advertising  and  Directory. 

This  account  should  include  all  revenues  derived  from  adver- 
tising in  directories  and  elsewhere. 

524.  Rents  from  Other  Operating  Property. 

This  account  should  include  all  revenaes  accruing  from  the 
rent  of  buildings  and  other  property  (except  leased  wires,  poles, 
conduits,  and  equipment  covered  by  accounts  No.  505,  "Minor 
Rents  of  Exchange  Plant,"  and  No.  515,  "Minor  Rents  of  Toll 
Plant, ' '),  when  such  property  is  used  also  by  the  company  and  the 
expense  of  maintaining  and  operating  the  rented  portion  can 
not  be  separated  from  the  total  expense. 

525.  Other  Miscellaneous  Revenue. 

This  account  should  include  all  miscellaneous  operating  reve- 
nues not  provided  for  elsewhere.  This  account  does  not  include 
nonoperating  revenue  as  provided  for  in  accounts  Nos.  310  to 
316,  inclusive. 

526.  Licensee  Revenue — Cr. 

AMien  a  telephone  company  grants  to  another  telephone 
company  the  use<^f  its  patents  or  furnishes  instruments  and 
equipment  and  general  supervision  under  an  agreement  for 
apportioning  the  revenues  of  the  licensee,  the  proportion  accru- 
ing to  the  licensor  should  be  included  by  the  licensor  in  this 
account. 

527.  Licensee  Revenue — Dr. 

When  a  telephone  company  is  granted  by  another  telephone 
company  the  use  of  its  jiatents,  or  is  furnished  instruments  and 
equii>mout  and  general  supervision  under  an  agreement  for 
apportioning  the  revenues  of  the  licensee,  the  proportion  accru- 
ing to  the  licensor  should  be  included  by  the  licensee  in  tliis 
account. 


64 

OPERATING  EXPENSE  ACCOUNTS. 
I.  MAINTENANCE  EXPENSES. 

Page. 

601.  Supervision  op  Maintenance 69 

602.  Repairs  of  Aerial  Plant 69 

603.  Repairs  of  Underground  Plant 69 

604.  Repairs  of  Central  Office  Equipment 69 

605.  Repairs  of  Station  Equipment 70 

606.  Repairs  of  Buildings  and  Grounds 70 

607.  Station  Removals  and  Changes 70 

608.  Depreciation  of  Plant  and  Equipment 71 

609.  Extraordinary  Depreciation 71 

610.  Other  Maintenance  Expenses , .  71 

611.  Repairs  Charged  to  Reserves — Cr 71 

II.  TEArriO  EXPENSES. 

620.  Central  Office  Superintendence 71 

621 .  Traffic  Superintendence 71 

622.  Service  Inspection 72 

623.  Clerical  Operating  Wages 72 

624.  Operators'  Wages 72 

625.  Central  Office  Supplies  and  Expenses 72 

626.  Rest  and  Lunch  Rooms .' .  72 

627.  Operators'  Schooling 72 

628.  Transmission  Power 72 

629.  Central  Office  Stationery  and  Printing 72 

630.  Messenger  Service 72 

631.  Miscellaneous  Central  Office  Expenses 73 

632.  Pay  Station  Expenses 73 

633.  Other  Traffic  Expenses 73 

III.  commekcial  expenses. 

640.  Commercial  Administration 73 

641.  Promotion  Expenses ^ 73 

642.  Advertising 73 

643.  Canvassing 73 

644.  Sublicensee  Relations 74 

645.  Collection  Expenses 74 

646.  Revenue  Accounting 74 

647.  Revenue  Collecting 74 

648.  Pay  Station  Commissions 74 

649.  Directory  P^xpenses 74 

650.  Other  Commerclal  Expenses 74 


65 

IV.  GENERAL  AND  MISCELLANEOUS  EXPENSES, 

Papp. 

660.  General  Office  Salaries 74 

661 .  Salaries  of  General  Officers 74 

662.  Salaries  0/  General  Office  Clerks 74 

663.  General  Office  Supplies  and  Expenses 7.") 

664.  Expenses  0/ General  Officers  and  Clerks 75 

665.  General  Office  Stationery  and  Printing 75 

666.  Other  General  Office  Supplies  and  Expenses 75 

667.  General  Law  Expenses 75 

668.  Insurance 75 

669.  Accidents  and  Damages 76 

670.  Law  Expenses  Connected  with  Damages 76 

67L  Miscella.veous  General  Expenses 76 

672.  Relief  Department  and  Pensions 76 

673.  Telephone  Franchise  Requirements 76 

674.  Amortization  of  Franchises  and  Patents 77 

675.  Other  General  Expenses 77 

676.  Telephone  Franchise  Requirements — Cr 77 


66 

INSTRUCTIONS    PERTAINING    TO    OPERATING    EXPENSE 

ACCOUNTS. 

21.  Repairs  defined. — Repairs,  as  used  in  the  text  of  the  various 
operating  expense  accounts,  includes  ordinary  and  extraordinary 
repairs. 

Ordinary  repairs  inckide: 

(a)  Testing  for,  locating,  and  clearing  crosses,  breaks,  grounds,  and 
other  line  troubles,  including  routine  work  intended  to  prevent  such 
troubles,  as,  for  example,  pulling  up  slack,  tightening  guys  and  reset- 
ting guy  stubs,  trimming  trees,  straightening  poles  and  cross  arms,  and 
cleaning  and  adjusting  apparatus; 

(6)  Replacements  of  minor  or  short-lived  parts  of  structures,  equip- 
ment, or  facilities; 

(c)  Replacements  of  minor  parts  of  wire  plant  or  equipment  made 
necessary  by  reason  of  faulty  adjustments,  excessive  strains,  mechanical 
injuries,  or  other  minor  casualties,  not  provided  against  in  the  charge  fur 
depreciation  of  plant  and  equipment; 

(d)  Rearrangements  and  changes  in  location  of  plant,  except  sub- 
scribers' station  equipment  (for  which  a  special  account  is  provided). 
This  includes  rearrangements  of  circuits,  reassociation  of  party  lines, 
rearranging  grouping  of  trunks  and  calling  circuits,  recross  connecting 
on  distributing  frames,  rerunning  jumper  wires,  underlining  switch- 
board jacks,  etc.,  together  with  materials  used  for  such  piuposes  which 
do  not  add  to  the  tangible  value  of  such  plant; 

(e)  Recovering  salvage  and  removing  retired  or  abandoned  property; 
(except  subscribers'  station  equipment)  when  such  costs  are  not  pro- 
vided for  by  the  depreciation  reserve. 

Ordinary  repairs  are  not  required  to  be  taken  into  account  in  fixing  a 
rate  of  depreciation. 

Extraordinary  repairs  include: 

(a)  Restoring  to  an  efficient  or  proper  condition  buildings,  structures, 
o^  other  units  of  property  which  have  deteriorated; 

(6)  Substituting,  in  order  to  maintain  normal  efficiency,  new  parts 
for  old  parts  of  continuous  structures,  such  as  pole  lines,  cables,  wires, 
conduite,  etc.,  where  such  substitutions  do  not  amount  to  a  prac- 
tical replacement  of  any  considerable  length  of  such  continuous  struc- 
tures; 

(c)  Restoring  the  condition  of  property  damaged  by  storms,  floods, 
fire,  or  other  casualties; 

(d)  Recovering  salvage  and  removing  retired  or  abandoned  property 
in  connection  with  above  work. 

Extraordinary  repairs  should  be  provided  for  by  adequate  charges  to 
depreciation. 

WTien  it  is  necessary  substantially  to  reconstruct  or  to  replace  a  major 
portion  of  any  unit  of  property  or  any  important  section  of  a  continuous 
structure,  the  cost  should  be  handled  through  the  capital  accounts;  that 
is,  the  cost  of  the  property  removed  or  replaced  should  be  credited  to  the 
appropriate  fixed  capital  accounts  and  the  new  property  should  be 
charged  thereto. 

All  repairs,  whether  ordinary  or  extraordinary,  should  be  charged  to 
the  appropriate  primary  operating  expense  accounts.  Extraordinary 
repairs  for  which  a  reserve  has  been  provided  should  then  be  concur- 


G7 

rently  charged  to  account  No.  102,  "Reserve  for  Accrued  Deprecia- 
tion— Cr.,"  and  credited  to  account  No.  611,  "Repairs  Charged  to  Re- 
serves— Cr." 

22.  Cost  of  repairs.— The  cost  of  repairs,  as  used  in  the  text  of  the 
various  operating  expense  accounts,  should  be  understood  to  incUide 
the  wages,  salaries,  and  fees  paid  employees  directly  engaged  in  the 
work  of  repairs,  personal  expenses  of  such  employees  when  borne  by 
the  company,  and  the  cost  of  materials  and  supplies  consumed  and  the 
expenses  of  facilities  employed  in  making  the  repairs  less  the  value  of 
any  salvage  recovered.  It  includes  also  the  cost  of  direct  supervision, 
such  as  of  foremen  or  superintendents  of  repair  gangs,  but  does  not 
include  the  cost  of  general  supervision  as  provided  for  in  account 
No.  601,  "SupervL4oii  of  Maintenance." 

23.  Depreciation  of  plant  and  equipment. — Telephone  companies 
should  include  in  operating  expenses  depreciation  charges  for  the  pur- 
pose of  creating  proper  and  adequate  reserves  to  cover  the  expenseg 
of  depreciation  currently  accruing  in  the  tangible  fixed  capital.  By 
expense  of  depreciation  is  meant — ■ 

(a)  The  losses  suffered  tlirough  the  current  lessening  in  value  of 
tangible  property  from  wear  and  tear  (not  covered  by  current  repairs). 

(6)  Obsolescence  or  inade(iuacy  resulting  from  age,  physical  change, 
or  supersession  by  reason  of  new  inventicms  and  discoveries,  changes 
in  popular  demand,  or  public  requirements,  and 

([•)  Losses  suffered  thnjugh  destruction  of  property  by  extraordinary 
casualties. 

The  amount  charged  as  expense  of  depreciation  should  be  based  upon 
.rules  determined  by  the  accounting  company.  Such  rules  may  be 
derived  from  a  consideration  of  the  company's  history  and  experience. 
Companies  should  be  prepared  to  furnish  the  Commission,  upon  de- 
mand, the  rules  and  a  sworn  statement  of  the  facts,  expert  opinions, 
and  estimates  upon  which  tkey  are  based. 

Tlie  estimate  for  depreciation  of  physical  property  should  take  into 
account — 

(a)  The  gradual  deterioration  and  ultimate  retirement  of  units  of 
property  which  may  be  satisfactcjrily  individualized,  such  as  build- 
ings, machines,  valuable  instruments,  etc.,  to  the  end  that  by  the 
time  such  units  of  property  go  out  of  service  there  shall  have  been 
accumulated  a  reserve  e<iuai  to  the  original  money  cost  of  such  property 
plus  expenses  incident  to  retirement  less  the  value  of  any  salvage. 

(h)  The  depreciation  accruing  in  property  which  can  not  be  readily 
indi\idualized,  such  as  pole  lines,  wires,  cables,  or  other  continuous 
structures,  where  exjienditures  for  repairs  or  replacements  of  indi- 
viilual  parts  ordinarily  are  not  actually  made  until  the  later  years  of 
the  life  in  service  of  such  ppjperty,  and  when  made  may,  therefore,  be 
classed  as  extraordinary  repairs. 

The  rate  of  depreciation  should  be  fixed  so  as  to  distribute,  as  nearly 
as  may  be,  evenly  throughout  the  life  of  the  depreciating  property 
the  burden  of  repairs  and  the  cost  of  capital  consimiod  in  operations 
during  a  given  month  or  year,  and  should  be  ba^ed  ujxm  the  average 
life  of  the  units  comprised  in  the  respective  classes  of  projx^rty. 


68 

Tho  amount  estimated  to  cover  the  expense  of  depreciation  of  fixed 
capital  should  be  charged  monthly  to  account  No.  608,  "Deprecia- 
tion of  Plant  and  Equipment "  (or  to  the  appropriate  clearing  account 
or  accounts),  and  concurrently  credited  to  account  No.  102,  "Reserve 
for  Accrued  Depreciation — Cr." 

Account  No.  413,  "Realized  Depreciation  not  Covered  by  Reserves," 
is  provided  in  the  Corporate  Surplus  or  Deficit  account  for  charges 
for  realized  depreciation  on  tangible  fixed  capital  retired  when  such 
depreciation  occurred  prior  to  the  establishment  of  account  No.  102, 
"Reserve  for  Accrued  Depreciation — Cr.,"  or  has  not  been  provided 
for  by  credits  to  that  account. 

24.  Extraordinary  casualties  and  unanticipated  reconstruction. — If  so 
authorized,  upon  application  to  the  Commission,  the  company  granted 
such  authority  may  charge  the  amount  named  in  the  authorization  to  a 
suspense  account  for  the  purpose  of  distributing  over  a  limited  period 
an  extraordinary  loss  of  such  a  natiu-e  that  it  can  not  be  anticipated 
by  the  exercise  of  reasonable  prudence.  Losses  of  this  sort  may  be 
due  to  the  requirement  by  lawful  authority  or  public  necessity  of 
improvements  involving  the  abandonment  of  a  considerable  portion 
of  plant  and  equipment  before  it  has  attained  its  normal  life  in  service, 
or  to  an  extraordinary  casualty  entirely  unforeseen  and  unprovided 
for.  The  original  cost  of  the  property  so  abandoned  or  destroyed 
should  be  credited  to  the  fixed  capital  accounts  in  which  it  was  carried, 
and  such  portion  of  the  cost  as  may  be  authorized  by  the  Commission 
may  be  charged  to  the  suspense  account,  the  remainder  of  the  cost, 
less  any  salvage,  being  charged  out  as  elsewhere  provided  in  case  of 
retirements  of  property.  The  suspense  account  so  raised  should  be* 
credited  and  account  No.  609,  "Extraordinary  Depreciation,"  debited 
monthly  with  such  an  amount  as  will,  through  its  regular  application, 
amortize  the  amount  of  the  loss  at  the  end  of  the  period  designated. 

All  ordinary  casualties  (those  which  occur  with  such  frequency 
that  the  principles  of  insurance  are  applicable  thereto)  should  be 
provided  for  through  an  insiu^ance  reserve  maintained  for  such  losses 
or  be  included  in  the  provision  for  depreciation  of  plant  and  equipment. 

25.  Joint  operating  expenses. — When  any  operating  expense  is  in- 
curred by  the  accounting  company  for  the  joint  benefit  of  itself  and 
others  under  an  agreement  for  apportioning  such  expenses  the  company 
charging  such  expenses  to  others  should  credit  such  amounts  to  its 
primary  expense  accoimts  to  which  the  expenses  were  charged  when 
incurred.  The  debtor  company  should  charge  the  amounts  so  billed 
to  its  priniary  expense  accounts.  Bills  rendered  by  the  operating 
company  for  joint  expenses  should  show  the  expenses  in  detail. 

The  amounts  so  handled  through  the  expense  accounts  should  not 
include  any  allowance  for  profit  or  return  upon  the  value  of  the 
property  used;  such  allowance,  if  any,  should  be  credited  by  the 
payee  to  the  appropriate  rent  revenue  account  and  charged  by  the 
payor  to  the  appropriate  rent  deduction  account. 


G9 

TEXT  EXPLANATORY  OF  OPERATING  EXPENSE  ACCOUNTS. 

I.  MAINTENANCE  EXPENSES. 

601.  Supervision  of  Maintenance. 

This  account  should  include  ths  pay  and  office  and  traveling 
expenses  of  superintendents  and  their  assistants  when  directly 
in  charge  of  maintenance  of  telephone  plant,  including  general, 
division,  and  district  plant  superintendents,  engineers,  archi- 
tects, and  their  office  and  field  forces;  the  cost  of  repairing 
drafting  and  engineering  instruments,  and  the  original  cost  of 
such  instruments  as  are  not  properly  chargeable  to  fixed  capital 
accounts;  the  cost  of  office  and  other  supplies  used  by  officers 
and  employees  whose  salaries  are  charged  to  this  account;  jani- 
tor service,  light,  heat,  and  miscellaneous  office  expenses  where 
separate  offices  are  maintained  for  such  employees;  also  that 
portion  of  the  salaries  and  expenses  of  the  general  engineering 
staff  of  the  company  which  is  assignable  to  maintenance. 

602.  Repairs  ok  Aeriai,  Plant. 

This  account  should  include  the  cost  of  repairs  of  all  plant  clas- 
sified as  aerial  plant,  such  as  poles,  towers,  cross  arms,  pins,  brack- 
ets, and  other  pole  fixtures;  braces,  guy  wires,  guy  stubs,  and  other 
pole  support.s;  aerial  cables,  and  the  su.^ponsion  wires,  bolts, 
clamps,  rings,  hangers,  etc.,  used  to  attach  cables  to  poles,  towers, 
or  other  su])ports;  aerial  cable  loading  coils,  cable  boxes,  and 
their  appurtenances;  and  aerial  telephone  wires,  drop  wires,  tie 
wires,  insulators,  and  sleeves.  It  includes  also  the  cost  of  trim- 
ming trees  and  clearing  and  removing  obstructions  from  right 
of  way  for  aerial  plant,  other  than  the  cost  of  first  clearing  right 
of  way. 

603.  Repairs  of  Uxdercrouxd  Pi.axt. 

This  account  .should  include  the  cost  of  repairs  of  all  plant  clas- 
sified as  underground  plant,  such  as  underground  conduits  and 
their  ap])urtenances;  miderground  cables,  submarine  cables,  and 
the  loading  coils,  towers,  boxes,  and  fittings  belonging  to  such 
cables.  It  also  includes  the  cost  of  repairing  right  of  way  for 
underground  and  submarine  cables,  and  the  cost  of  repaving 
after  repairs  of  miderground  conduits. 

604.  Repairs  of  Central  Office  Ecjuip.ment. 

This  account  should  include  the  cost  of  repairing  telephone 
equipment  in  central  telephone  offices,  such  as  switchboards, 
monitors'  and  supervisors'  desks,  testing  outfits,  main  and  in- 
termediate frames,  cables,  and  jumper  wires,  call  registers  and 
meters,  relay  racks  and  coil  racks;  equipment  for  generating  and 
regulating  power  for  telephone  purposes,  such  as  batteries,  en- 
gines, motors,  generators,  rectifiers,  transformers,  meters,  fuses, 
and  ])rotectors;  telephone  and  telegraph  instruments  and  other 


70 

electrical  instruments  and  apparatus  in  the  central  office;  equip- 
ment for  operators'  schools  and  rest  rooms,  and  furniture  and 
fixtures  required  for  the  uses  or  convenience  of  the  operating 
forces. 

605.  Repairs  of  Station  Equipment. 

This  account  should  include  the  cost  of  repairing  station  appa- 
ratus, such  as  telephone  seta,  intercommunicating  sets,  bells, 
backboards,  desk  stands,  coin  boxes,  protectors,  battery  boxes, 
batteries,  cords,  and  telephone  and  telegraph  instruments  or 
parts  thereof;  interior  block  wires;  private  branch  exchange 
switchboards,  distributing  frames,  and  switchboard  cables,  and 
booths  and  special  fittings  for  same,  such  as  desks,  chairs,  fans, 
and  cash  registers. 

Note. — The  cost  of  renewals  of  batteries  at  stations  is  not  chargeable  to  this 
account,  but  to  account  No.  628,  "Transmission  Power." 

606.  Repairs  of  Buildings  and  Grounds. 

This  account  should  include  the  cost  of  repairing  general  offices, 
central  offices,  test  stations,  or  other  telephone  offices  and  the  fix- 
tures (except  telephone  apparatus)  therein,  such  as  elevators, 
plumbing,  apparatus  for  heating,  lighting,  ventilating,  and 
power;  and  the  cost  of  maintaining  yards  and  grounds,  wdth 
their  fences,  sidewalks,  sewers,  etc.,  appurtenant  to  such  build- 
ings. Charge  also  to  this  account  the  cost  of  repairing  shops, 
stores,  stables,  and  garages,  and  permanent  fixtures  therein. 

607.  Station  Removals  and  Changes. 

This  account  should  include  the  cost  of  disconnecting  and 
removing  and  of  changing  the  location  of  all  plant  classified  as 
subscribers'  station  equipment  (as  defined  in  account  No.  230, 
"Station  Equipment"),  including  freight  and  cartage  on  such 
equipment  and  material  as  is  sent  to  storehouse. 

(1)  WTien  stations  are  removed  (not  merely  changed  in  loca- 
tion) from  subscribers'  premises,  the  original  cost  (estimated,  if 
not  known)  of  the  station  should  be  credited  to  the  appropriate 
fixed  capital  accounts,  and  the  cost  of  the  instruments,  private 
branch  exchange  apparatus,  booths,  and  fittings  should  be 
charged  to  account  No.  122,  "Materials  and  Supplies,"  while  the 
cost  of  installation,  including  inside  wires,  or  interior  block  wires, 
and  that  portion  of  aerial  wire  which  could  be  used  only  at  the 
subscribers'  premises  from  which  the  station  is  removed,  less 
the  value  of  any  salvage,  should  be  charged  to  this  account. 

Note. — When  extensive  replacements  are  made  of  subscribers'  station  equip- 
ment, or  of  drop  or  block  wiring  taken  out  of  service  because  of  inadequacy,  or 
obsolescence,  as  when  a  magneto  system  is  changed  to  a  common  battery  or 
when  open  wire  distribution  is  replaced  by  interior  block  construction,  the  cost 
of  making  such  replacements  should  be  handled  tlirough  the  regu^^r  construc- 
tion and  depreciation  accounts,  and  should  not  be  included  in  the  above 
account. 


71 

(2)  If  wiring  left  from  previous  installations  is  reused  either 
on  same  or  other  premises,  the  gain  should  be  credited  to  this 
account.  This  includes  the  gain  on  inside  wires  and  interior 
block  wires  and  on  that  portion  of  aerial  wire  which  could  be 
used  only  at  subscribers'  premises. 

(3)  When  stations  are  disconnected  but  left  on  premises,  charge 
to  this  account  the  cost  of  disconnecting,  and  when  reconnected, 
the  cost  of  reconnecting. 

(4)  When  station  location  or  service  is  changed,  charge  to  this 
account  the  cost  of  such  changes,  less  the  amount,  if  any,  properly 
chargeable  to  fixed  capital  accounts  for  actual  additions  to  plant. 

(5)  Credit  to  this  account  amounts  charged  subscribers  for 
moves  and  changes. 

608.  Depreciation  of  Plant  and  Equipment. 

Charge  to  this  account  monthly  the  amount  estimated  to  be 
necessary  to  cover  the  depreciation  accruing  during  the  month 
in  the  company's  tangible  fixed  capital  (except  depreciation 
provided  in  "Clearing  Accounts,"  Nos.  701,  702,  and  703). 
Amounts  charged  to  this  account  should  be  concurrently  credited 
to  account  No.  102,  "Reserve  for  Accrued  Depreciation— Cr." 
(See  sec.  23,  p.  67.) 

609.  Extraordinary  Depreciation. 

This  account  should  be  charged  monthly  with  such  an  amount 
as  will,  through  its  regular  application,  amortize  any  amount 
that  may  be  carried  in  suspense  on  account  of  extraordinary 
casualties  and  unanticipated  reconstruction.     (See  sec.  24,  p.  68.) 

610.  Other  Maintenance  Expenses. 

This  account  should  include  cost  of  repairing  telephone  plant 
and  equipment  not  provided  for  elsewhere. 

611.  Repairs  Charged  to  Reserves — Cr. 

Credit  to  this  account  and  charge  concurrently  to  account 
No.  102,  "Reserve  for  Accrued  Depreciation— Cr.,"  an  amount 
equal  to  the  cost  of  extraordinary  repairs  made  for  which  provision 
had  been  made  in  that  reserve;  also,  credit  to  this  account  and 
charge  concurrently  to  the  insurers  or  to  the  insurance  reserve  an 
amount  equal  to  the  cost  of  repairs  made  necessary  by  casualties, 
when  such  cost  is  covered  by  insurance  or  an  insurance  reserve. 
(See  sec.  21,  p.  66.) 

II.  TRAFFIC  EXPENSES. 

620.  Central  Office  Superintendence. 

This  account  should  include  the  cost  of  all  central  office 
superintendence  as  provided  in  the  following  subaccounts: 
621.   Traffic  Superintendence. 

This  account  should  include  the  pay  and  traveling  expenses 
of  officers  and  their  assistants  when  directly  in  charge  of  traffic, 
either  for  the  company  as  a  whole  or  a  territorial  subdivision; 


72 

also  cost  of  office  supplies,  stationery,  and  printing;  janitor 
service,  light,  heat,  and  miscellaneous  office  expenses  if  separate 
offices  are  maintained  for  such  employees. 

622.  Service  Inspection. 

This  account  should  include  the  pay  and  expenses  of  service 
inspection  forces,  including  all  employees  on  this  work  not 
engaged  in  the  regular  handling  of  the  traffic. 

623.  Clerical  Operating  Wacres. 

This  account  should  include  the  pay  of  clerks,  stenographers, 
and  office  boys  engaged  in  traffic  work  in  central  office  operating 
rooms. 

624.  Operators'  Wages. 

This  account  should  include  the  pay  of  chief  operators,  assist- 
ant chief  operators,  monitors,  supervisors,  information  operators, 
directory  operators,  operators  employed  in  the  distribution  of 
tickets  to  other  operators,  operators  engaged  in  quoting  toll  rates 
and  charges,  switchboard  operators,  telegraph  operators,  and  all 
other  operators  employed  in  the  operation  of  the  central  office 
equipment. 

625.  Central  Office  Supplies  and  Expenses. 

This  account  should  include  the  cost  of  all  central  office  sup- 
plies and  expenses  as  provided  in  the  following  subaccounts: 

626.  Rest  and  Lunch  Rooms. 

This  account  should  include  the  cost  of  operating  the  retiring, 
rest,  and  lunch  rooms  for  central  office  employees,  including  the 
cost  of  lunches  ^provided  for  such  employees.  Credit  to  this 
account  amounts  received  for  lunches  served. 

627.  Operators'  Schooling. 

This  account  should  include  the  expenses  of  training  new 
operators  (whether  a  school  is  maintained  or  not),  including 
wages  paid  them  for  wliich  no  service  is  rendered,  the  salaries 
and  expenses  of  instructors,  and  supplies  furnished  to  schools 
for  operators. 

628.  Transmission  Power. 

This  account  should  include  the  cost  of  power  purchased  for 
transmitting  traffic  and  for  operating  signals;  the  cost  of  renewing 
local  and  central  office  batteries;  and  the  cost  of  labor  employed 
and  supplies  consumed  in  operating  the  generating  plant  and 
storage  batteries  for  transmitting  current  or  for  operating  signals. 

629.  Central  Office  Stationery  and  Printing. 

This  account  should  include  the  cost  of  all  postage,  stationery, 
stationery  supplies,  anri  printing  for  use  of  central  offices. 

630.  Messenger  Service. 

This  account  should  include  pay  and  expenses  of  messengers 
employed  in  delivering  messages  and  notifying  persons  of  calls 
at  telephone  stations. 


73 

(j31.    Miscellaneous  Central  Office  Expenses. 

This  account  should  include  the  cost  of  water,  ice,  fuel,  liphts, 
towels,  toilet  supplies,  and  of  janitor  service  and  other  care  of 
central  offices. 

632.  P.\Y  Rt.\tion  Expenses. 

This  account  should  include  all  traffic  expenses,  except  com- 
missions and  central  office  operating  expenses,  incurred  in  con- 
nection with  the  operation  of  public  pay  stations. 

633.  Other  Traffic  Expenses. 

This  account  should  include  all  traffic  expenses  not  elsewhere 
provided  for. 

Note.— Rent  paid  for  central  oflices  is  chargeable  to  account  No.  331,  "Rent 
Deductions  for  Telephone  Oflices,"  and  not  to  this  account. 

III.  GOMMEEOIAL  EXPENSES. 

640.  Commercial  Administration. 

This  account  should  include  the  pay  and  expenses  of  officers 
and  their  office  forces  directly  in  charge  of  the  commercial  depart- 
ment, either  for  the  company  as  a  whole  or  for  a  territorial  subdi- 
vision; the  pay  and  expenses  of  employees  when  engaged  in  pre- 
paring contract  orders,  handling  unsolicited  contracts  or  contract 
changes  including  miscellaneous  relations  with  subscribers  and 
patrons  not  specifically  assignable  to  promotion,  collection,  or 
directory  expenses.  Charge  also  to  this  account  the  cost  of 
postage,  printing,  and  stationery;  janitor  service,  light,  heat, 
and  miscellaneous  office  expenses  if  separate  offices  are  main- 
tained for  such  employees. 

Note.— This  account  may  include  the  entire  pay  and  expenses  of  employees 
of  the  commercial  department  who  are  only  incidentally  engaged  in  duties  in 
connection  with  promotion,  collection,  and  directories;  if  such  employees  are 
assigned  all  or  part  of  their  lime  to  such  duties  their  pay  and  expenses  should 
be  charged  proportionately  to  the  accounts  provided  for  such  expenses. 

641.  Promotion  Expenses. 

This  account  should  include  the  pay  and  expenses  of  em- 
ployees and  the  cost  of  demonstrations,  advertising,  and  can- 
vassing designed  to  promote  the  extension  of  the  company's 
business,  as  provided  for  in  the  following  subaccounts: 

642.  Adr(rtmng. 

This  account  should  include  salaries  and  expenses  of  the 
advertising  manager,  his  assistants  and  clerks;  cost  of  commer- 
cial advertisement.s  in  newspapers  or  magazines;  posters,  bulle- 
tins, advertising  sundries,  booklets,  and  all  related  items;  also 
minor  rents  and  cost  of  installing  and  operating  telephones  in 
public  places  wholly  for  demonstration  purposes. 

643.  Canvassing. 

This  account  should  include  expenses  incurred  in  soliciting 
new  business  or  for  changing  or  rene^ving  existing  service, 
including  the  pay  and  expen.ses  of  canvassers. 


74 

644.  Sublicensee  Relations. 

This  account  should  include  expenses  incurred  in  developing 
the  exchange  of  business  with  sublicensee  companies  and  inde- 
pendent connecting  telephone  companies. 
645.  Collection  Expenses. 

This  account  should  include  the  cost  of  accounting  for  and 
collecting  the  revenues  of  the  company,  as  provided  for  in  the 
following  subaccounts: 

646.  Revenue  Accounting. 

This  account  should  include  the  cost  of  keeping  accounts  with 
subscribers  and  rendering  bills  for  revenue  ser\dce,  including  the 
cost  of  postage,  stationery,  and  printing,  and  pay  and  expenses 
of  bookkeepers  and  all  clerks  in  accounting  department  having 
to  do  with  subscribers'  accounts. 

647.  Revenue  Collecting. 

This  account  should  include  the  expenses  of  the  collection 
bureau,  including  postage,  stationery,  and  printing,  collectors' 
salaries  or  commissions,  car  fares,  cost  of  badges,  and  of  deliver- 
ing bills. 

648.  Pay  Station  Commissions. 

This  account  should  include  commissions  allowed  for  handling 
exchange  and  toll  service  messages  from  public  pay  stations. 

649.  ©iRECTORY  Expenses. 

This  account  should  include  the  cost  of  preparing,  printing, 
and  distributing  directories,  including  the  cost  of  soliciting 
advertisements  for  directories.  (See  account  No.  132,  "Prepaid 
Directory  Expense.") 

650.  Other  Commercial  Expenses. 

This  account  should  include  all  commercial  expenses  not  pro- 
vided for  elsewhere. 

IV.  GENEEAL  AND  MISCELLANEOUS  EXPENSES. 

660.  General  Office  Salaries. 

This  account  should  include  the  matters  provided  for  in  the 
following  subaccounts: 

661.  Salaries  of  General  Officers. 

Tliis  account  should  include  the  salaries  of  the  chairman  of 
the  board,  president,  vice  president,  secretary,  treasurer,  comp- 
troller, general  auditor,  general  manager,  general  superintend- 
ent, and  all  other  officers  whose  jurisdiction  extends  to  the 
operations  of  the  company  as  a  whole. 

662.  Salaries  of  General  Office  Clerks. 

This  account  should  include  the  salaries  and  wages  of  book- 
keepers, paymasters,  cashiers,  stenographers,  and  all  other 
clerks  employed  in  the  general  office,  except  those  engaged  in 
revenue  accounting  and  collecting. 


663.  Ge.veral  Office  Supplies  and  Expexses. 

This  af, count  Hhould  infliulo  the  matters  provided  for  in  the 
following  subaccounts: 

664.  Expenses  of  General  Officers  and  Clerks. 

This  account  .should  include  the  traveling  and  incidental  ex- 
penses of  general  officers  and  other  general  office  employees. 

665.  General  Office  Stationery  and  Printing. 

This  account  should  include  the  cost  of  all  postage,  station- 
ery, stationery  supplies,  and  printing  for  use  in  general  offices, 
except  that  used  in  revenue  accounting  and  collecting. 
66G.  Other  General  Office  Supplies  and  Expenses. 

This  account  should  include  the  cost  of  office  supplies  (other 
than  postage,  stationery,  and  printing),  repairs  of  office  furni- 
ture and  replacements  of  such  furniture  as  has  not  been  capi- 
talized; cost  of  telegrams  and  of  any  special  telephone  service; 
wages  of  janitors,  porters,  and  messengers;  and  other  miscel- 
laneous expenses  of  general  offices. 

Note. — Rents  of  general  offices  (less  such  estimated  cost,  if  any,  as  Ls  included 
to  cover  the  expease  of  furnishing,  heating,  and  lighting  them  by  the  lessor) 
should  be  charged  to  account  No.  331,  "Rent  Deductions  for  Telephone 
Offlces." 

C67-.  General  Law  Expense.?. 

This  account  should  include  all  law  expenses  (except  those  in- 
curred in  the  defense  and  settlement  of  damage  claims), including 
pay  and  expenses  of  all  counsel,  solicitors,  and  attorneys,  their 
clerks  and  attendants,  janitor  service,  light,  heat,  and  other  ex- 
penses of  their  offices;  cost  of  law  books,  printing  briefs,  legal 
forms,  testimony,  reports,  etc.;  fees  and  retainers  for  services  of 
attorneys  not  regular  employees;  court  costs  and  payments  of 
special,  notarial,  and  witness  fees  not  provided  for  elsewhere; 
expenses  connected  with  taking  depo.sitions;  and  all  law  and 
court  expenses  not  provided  for  elsewhere. 

Note.— The  compensation  of  the  general  solicitor  or  counsel  or  other  attor- 
neys engaged  partly  in  the  defense  or  settlement  of  damage  .suits  and  partly 
in  other  legal  work  should  be  properly  apportioned  between  this  account  and 
accoimt  No.  070,  "Law  Expenses  Coimected  with  Damages.'' 

668.   I.VSURAXCE. 

This  account  should  include  premiums  paid  to  insurance 
companies  for  fire,  fidelity,  boiler,  casualty,  burglar,  and  all 
other  insurance.  Charge  also  to  this  account  and  credit  account 
No.  169,  ''Insurance  and  Casualty  Reserves,"  amounts  set  aside 
as  an  insurance  reserve. 

This  account  should  be  credited  and  the  proper  fixed  capital 
account  or  accounts  concurrently  charged  with  the  cost  of  insur- 
ance applicable  to  construction  work. 

Note.— In  annual  reports  to  the  Commission  the  company  will  be  required 
to  report  the  charges  made  to  this  account  for  the  various  kinds  of  insur- 
ance, and  for  self-iusumuce. 


76 

669.  Accidents  axd  Damages. 

This  account  should  include  all  expenses  (other  than  law 
expenses)  incurred  on  account  of  persons  killed  or  injured  and 
on  account  of  property  of  others  damaged  when  such  expenses 
have  not  been  provided  for  by  insurance  or  by  a  reserve.  It 
includes  the  pay  and  expenses  of  claim  agents,  investigators, 
and  adjusters;  wages  paid  employees  if  absent  on  account  of 
injury;  fees  and  expenses  of  surgeons  and  doctors;  nursing, 
hospital  attendance,  medical  and  surgical  supplies,  fees  and 
expenses  of  coroners  and  undertakers,  and  contributions  to 
hospitals;  also  amounts  paid  in  settlement  of  personal  injury  or 
damage  claims. 

This  account  should  be  credited  and  the  proper  subdivisions 
of  fixed  capital  accounts  concurrently  charged  ^vith  the  expenses 
of  accidents  and  damages  incident  to  construction  work. 

670.  Law  Expenses  Connected  with  Damages. 

This  account  should  include  all  law  expenses  connected  with 
the  defense  or  settlement  of  damage  claims,  including  a  proper 
proportion  of  the  salaries  and  expenses  of  the  general  solicitor  or 
counsel,  and  salaries,  fees,  and  expenses  of  attorneys  engaged 
in  this  work;  fees  of  court  stenographers  and  other  court  expenses; 
the  cost  of  law  books,  printing  briefs,  court  records,  and  similar 
papers  in  connection  with  such  cases. 

This  account  should  be  credited  and  the  proper  subdi^•isions 
of  fixed  capital  accounts  concurrently  charged  with  law  expenses 
incident  to  damage  claims  arising  out  of  construction  work. 

671.  Miscellaneous  General  Expenses. 

This  account  should  include  the  matters  provided  for  in  the 
following  subaccounts: 

672.  Relief  Department  and  Pensions. 

This  account  should  include  pensions  or  other  benefits  paid 
to  employees  or  representatives  of  former  employees  and  ex- 
penses in  connection  therewith;  salaries  and  expenses  incurred 
in  conducting  a  relief  department,  and  contributions  made  to 
such  department. 

673.  Telephone  Franchise  Bequirements. 

This  account  should  include  the  cost  of  all  service  and  materi- 
als and  supplies  furnished  to  municipal  corporations  in  compli- 
ance with  franchise  requirements  and  for  which  no  payment  is  re- 
ceived by  the  company:  also  of  all  direct  expense,  such  as  paving 
and  other  like  matters,  incurred  in  compliance  with  such  require- 
ments and  for  which  no  reimbursement  is  received  by  the  com- 
pany. This  does  not  include  such  expense  incurred  in  con- 
nection with  construction  or  repairs,  which  should  be  charged 
to  fixed  capital  or  maintenance  accounts.  Amounts  charged  to 
this  account  for  which  there  is  no  direct  money  outlay  should  be 
credited  to  account  No.  676,  "Telephone  Franchise  Require- 
ments— Cr." 


77 

674.  Amortization  of  Franchises  and  Patents. 

This  account  should  include  each  month  the  amount  necea- 
8ar>'  to  cover  such  pf)rtionH  of  the  life  of  limited  fraiu-hiBes  and 
patents  as  has  expired  or  been  consumed  during  the  month. 
The  amount  so  charged  should  be  concurrently  credited  to 
account  No.  103,  "Reserve  for  Amortization  of  Intangible  Cap- 
ital—Or.  " 

Note.— The  amount  charged  to  this  account  should  be  based  upon  a  rule 
determined  by  the  accounting  company,  the  purpose  and  efTect  of  such  rule 
being  to  accumulate  by  charges  equitably  distributed  throughout  the  life 
of  any  franchise  or  patent,  a  resen-e  that  will,  at  the  expiration  of  its  life,  equal 
the  original  cost. 

675.  Other  General  Expenses. 

This  account  should  include  such  incidental  general  expenses 
as  are  not  provided  for  in  the  foregoing  accounts,  such  as  cost 
of  publishing  notices  of  stockholders'  meetings,  of  election  of 
directors,  annual  reports  in  newspapers,  and  of  dividends  de- 
clared, and  fees  and  expenses  paid  to  directors,  expenses  of 
transfer  agents,  and  listing  of  stocks  on  exchange. 

676.  Telephone  Franchise  Requirements — Cr. 

This  account  should  include  the  amounts  included  in  account 
No.  673,  'Telephone  Franchise  Requirements."  for  which  there 
is  no  actual  money  outlay. 

OLEAEING  ACCOUNTS. 

[Required  of  Class  A  and  Class  B  Companies.] 

The  following  accounts  are  provided  for  certain  expenses  which 
usually  affect  several  classes  of  operations  but  need  to  be  brought 
together  in  one  account  in  order  that  the  total  of  the  expenses  may 
be  known  and  properly  distributed. 

701.  Shop  Expense. 

This  account  or  appropriate  subaccounts  .should  be  arranged 
so  as  to  record  separately  the  expenses  of  the  general  shops  aa 
follows:  (I)  Salaries  and  wages  of  shop  employees;  (2)  personal 
and  incidental  expenses  of  such  employees;  (3)  materials  and 
supplies  for  general  shop  use;  (4)  repairs  of  shop  tools  and 
machinery;  (5)  rent  paid  for  shop  buildings;  (6)  depreciation 
of  shop  tools,  machinery,  and  appliances. 

The  shop  expense  account  should  be  cleared  by  apportioning 
the  total  amount  of  the  expenses  to  the  various  jobs  on  an  equi- 
table basis. 

702.  Stable  and  Garage  P^xpknse. 

This  account  or  appropriate  subaccounts  should  be  arranged 
so  as  to  record  separately  the  expenses  of  stables  and  garages  as 
follows:  (1)  Salaries  and  wages  of  drivers,  chauffeurs,  stable- 
men, garagemen,  and  other  employees  in  stables  and  garages; 


78 

(2)  personal  and  incidental  expenses  of  such  employees;  (3) 
materials  and  supplies,  including  fuel  and  gasoline,  harness, 
tires,  and  other  supplies  for  stables  and  garages;  (4)  repairs  of 
automobiles  and  other  veliicles  and  harness;  (5)  rent  paid  for 
buildings,  horses  and  veliicles;  (6)  depreciation  on  vehicles, 
horses,  harness,  etc.,  including  losses  unprovided  for  by  reserves 
or  insurance. 

Credit  to  tliis  account  any  charges  for  service  performed  for 
others. 

A  record  should  be  kept  of  the  use  of  teams  and  automobiles, 
and  the  total  expense  should  be  apportioned  to  the  proper 
accounts  according  to  use,  or  the  debits  to  the  expense  ac- 
counts may  be  made  at  rates  per  hour  of  service  which  have 
been  found  to  be  fair  and  to  distribute  the  total  expense 
equitably. 

703.  Tool  Expense. 

Charge  to  this  account  all  expense  for  tools  (except  shop  tools 
and  tools  carried  as  supplies  unissued).  It  includes  (1)  the  cost 
of  small  hand  tools  of  which  no  account  is  kept  after  issue;  (2)  the 
cost  of  repairing  tools;  (3)  the  cost  of  tools  lost  or  stolen;  (4)  de- 
preciation on  tools  taken  out  of  service  because  of  breakage  or 
other  deterioration. 

Tliis  account  should  be  cleared  by  adding  to  the  expense  of 
repairs  and  cost  of  plant  installed  such  amounts  as  wall  equitably 
distribute  the  total  expense  for  tools. 

704.  Supply  Expense. 

Charge  to  this  account  or  to  appropriate  subaccounts  all  ex- 
penses (except  insurance  and  taxes)  incurred  directly  in  con- 
nection with  the  purchase,  storage,  handling,  and  distribution 
of  materials  and  supplies  and  stationery.  It  includes  (1)  the 
pay  and  expenses  of  purchasing  agents,  managers  of  stores,  clerks, 
and  laborers;  (2)  rents  paid  for  stores;  (3)  cost  of  lighting  and 
heating;  (4)  undistributed  transportation  charges;  (5)  discounts 
recovered  through  prompt  payment  of  bills  for  materials  and 
supplies  when  such  discounts  can  not  be  assigned  to  the  particu- 
lar bills;  (6)  overages  or  shortages  in  the  materials  and  supplies 
account  disclosed  by  inventories  which  c^an  not  be  assigned  to 
specific  accounts;  and  (7)  the  estimated  depreciation  on  mate- 
rials and  supplies  due  to  breakage,  leakage,  shortage,  and  wear 
and  tear. 

This  account  should  be  cleared  by  adding  to  the  cost  of  ma- 
terials and  supplies  passing  through  stores  a  suitable  loading 
charge  which  will  equitably  distribute  the  total  cost  of  conduct- 
ing the  stores  and  by  adding  to  the  cost  of  such  supplies  as  are 
bought  by  the  purchasing  department  a  pro  rata  share  of  the  total 
expense  for  the  purchasing  department. 


79 

705.  Enoineering  Expense. 

Charge  to  this  account  or  to  appropriate  subaccountfi  all  ex- 
peiises  for  engineering  so  as  to  show  8?i)arately  the  following: 
(1)  Salaries  and  wages;  (2)  personal  and  incidental  expenses  of 
engineering  dei)artment  employees;  (3)  rent  paid  for  office  and 
(4)  office  expenses. 

This  account  should  be  cleared  by  apportioning  the  total 
expenses  to  operating  expenses  and  fixed  capital  accounts  on 
the  basis  of  service  rendered,  as  determined  by  the  actual  time 
devoted  to  particular  jobs  or  on  an  equitable  basis  fixed  by  the 
officers  of  the  company. 

706.  Plant  Supervi.sion  Expense. 

Charge  to  tliis  account  the  cost  of  general  supervision  of  the 
maintenance  and  construction  of  the  plant  where  a  separate 
department  of  the  company's  organization  is  charged  with  such 
supervision.  It  includes  the  pay  and  expenses  of  the  plant 
supervising  ofiicers,  such  as  the  general  plant  superintendent, 
district  plant  superintendent,  plant  engineers  and  their  office 
and  field  forces,  charged  with  planning  for  and  superintending 
the  work  of  maintenance  and  ])lant  construction. 

This  account  or  appropriate  subaccounts  should  be  so  arranged 
as  to  show  in  detail  the  expenses  of  the  plant  super^'ision  depart- 
ment as  follows:  (1)  Salaries  and  wages;  (2)  personal  and  inci- 
dental expenses  of  employees;  (3)  rent  paid  for  offices;  and  (4) 
office  expenses. 

Tlus  account  should  be  cleared  by  charging  directly  to  the 
appropriate  accounts  such  expenses  as  can  be  allocated  to  par- 
ticular pieces  of  work  and  by  charging  out  the  balance  on  the 
basis  of  labor  employed  in  all  construction  or  maintenance 
work  in  progress. 

Note.— The  pay  of  general  foremen  and  foremen  in  direet  charge  of  jobs 
should  be  included  in  the  cost  of  the  job  and  not  charged  to  this  accoiuit. 

707.  House  Service  Expense. 

Tliis  account  should  include  the  expenses  pertaining  to  the 
operation  of  offices  and  buildings,  whether  owned  or  rented  by 
the  company,  when  such  expenses  can  not  be  allocated  as  they 
accrue  to  the  operating  expense  accounts  and^other  accounts. 
Tliis  account  includes  fuel,  heat,  light,  power,  elevator  8er\-ice, 
janitor  service,  and  like  expenses,  but  does  not  include  rents, 
insurance,  taxes,  and  maintenance  expenses. 

Tliis  account  should  be  cleared  by  apportioning  the  entire 
expense  tc  the  operating  expenses  and  oth?r  accounts  on  ba^is 
of  the  use  made  of  such  jiroperty. 

o 


SUPPLEMENT  TO  FIRST  ISSUE 

OF  TUE 

UNIFORM  SYSTEM  OF  ACCOUNTS 

FOR 

TELEPHONE  COMPANIES 


CLASS  A  AND  CLASS  B 


AS   PRESCRIBED   BY   THE 


INTERSTATE  COMMERCE  COMMISSION 

IN  ACCORDANCE  WITH  SECTION  20  OF  THE 
ACT  TO  REGULATE  COMMERCE 


EfiFective  on  January  1,  1915 


WASHINGTON 

GOVERNMENT   PRINTING  OFFICE 

1914 


THE  INTERSTATE  COMMERCE  COMMISSION. 


James  S.  Harlan,  of  Illinois. 
JuDSON  C.  Clements,  of  Georgia. 
Edgar  E,  Clark,  of  Iowa. 
Charles  C.  McChord,  of  Kentucky. 
Balthasar  H.  Meyer,  of  Wisconsin. 
Henry  C.  Hall,  of  Colorado. 
WiNTHROP  M.  Daniels,  of  New  Jersey. 

George  B.  McGinty,  Secretary, 

(2) 


ORDER. 

At  a  General  Session  of  the  INTERSTATE  COMMERCE 
COMMISSION,  held  at  its  office  in  Washington,  D.  C, 
on  the  22d  day  of  December,  1914. 

The  subject  of  a  Uniform  System  of  Accounts  to  be 
prescribed  for  and  kept  by  t-elephonc  companies  being 
under  consideration,  the  followhig  order  was  entered: 

It  is  ordered,  That  the  Supplement  to  the  First  Issue 
of  the  Uniform  System  of  Accounts  for  Telephone  Com- 
panies, Class  A  and  Class  B,  with  the  text  pertaining 
thereto,  a  copy  of  which  is  now  before  this  Commission, 
be,  and  the  same  is  hereby,  approved ;  that  a  copy  thereof, 
duly  authenticated  by  the  Secretary  of  the  Commission 
be  filed  in  its  archives,  and  a  second  copy  thereof,  in  like 
manner  authenticated,  in  the  office  of  the  Division  of 
Carriers'  Accounts;  and  that  each  of  said  copies  so 
authenticated  and  filed  shall  be  deemed  an  original 
record  thereof. 

It  is  further  ordered,  That  the  said  Supplement,  with 
the  text  pertaming  thereto,  be,  and  the  same  is  hereby, 
prescribed  for  the  use  of  Glass  A  and  Class  B  telephone 
companies  (those  having  annual  operating  revejmes 
exceeding  $50,000),  subject  to  the  provisions  of  the  Act 
to  Regulate  Commerce  as  amended;  and  that  a  copy  of 
the  said  Supplement  be  sent  to  each  and  every  such 
carrier  and  to  each  and  every  receiver  or  operating 
trustee  of  any  such  carrier. 

It  is  further  ordered,  That  January  1,  1915,  be,  and  is 
hereby,  fLxed  as  the  date  on  which  the  said  Supplement 
shall  become  effective. 

By  the  Commission : 

[seal.]  George  B.  McGintt, 

Secretary. 

73555''-14  ^3) 


INTRODUCTORY   LETTER. 


Interstate  Commerce  Commission, 

Division  of  Carriers'  Accounts, 

Washington,  December  22,  1914- 

To  Class  A  and  Class  B  Telephone  Companies: 

The  Uniform  System  of  Accounts  for  Telephone  Com- 
panies, Class  A  and  Class  B,  became  effective  on  January 
1,  1913. 

It  is  found  advisable  to  add  an  additional  balance- 
sheet  account  to  take  care  of  deferred  credit  items  not 
covered  by  accounts  Nos.  168, 169,  and  170.  Account  No. 
170a,  "Other  deferred  credit  items,"  is  added  to  cover 
suspense  account  credit  balances  that  are  not  provided 
for  elsewhere. 

With  this  exception,  no  changes  have  been  made  in 
the  Uniform  System  of  Accounts  for  Telephone  Compa- 
nies, Class  A  and  Class  B. 

Fred  W.  Sweney, 
Chief  Examiner  of  Accounts. 

(5) 


SUPPLEMENT  TO  THE  FIRST  ISSUE  OF  THE  UNIFORM 
SYSTEM  OF  ACCOUNTS  P^OR  TELEPHONE  COMPANIES, 
CLASS  A  AND   CLASS  B. 


BALANCE-SHEET  ACCOUNTS. 

Add  the  following  to  the  text  explanatory  of  balance-sheet  accounts 
on  page  29: 

170a.  Other  Deferred  Credit  Items. 

This  account  shall  include  su.'^pense  account  credit  balances 
that  can  not  be  entirely  cleared  and  dis])osed  of  until  additional 
information  i.-*  rcfcived,  and  other  items  of  the  nature  of  deferred 
creditti  not  provided  for  elsewhere.  It  should  include  such  mat- 
ters as  credit  balances  in  clearing  accounts,  items  awaiting 
adjustment  between  accounts,  amounts  to  be  .<]tread  over  a 
stated  i)ericHl  not  provided  for  elsewhere,  and  similar  items. 

(7) 

o 


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